Are You TRULY Living Within Your Means?

by Miranda Marquit

You probably know that the key to financial success is living within your means. The question, though, is this: Are you truly living within your means? Many people think that they are living within their means, but they may actually not be. The COUNTRY Financial Security Index just released a survey that indicates there is a “perception gap” between Americans who believe they are living within their means and that really are living within their means.

Interestingly, according to the survey, only 9% of people say they live a lifestyle that is more than they can afford. However, this doesn’t match up with the 21% of people who indicate that their monthly spending exceeds their monthly income at least half of the year. So, there are people who think that they can afford their current lifestyles — even though their expenses are exceeding their incomes a significant portion of the time.

Here is what COUNTRY Financial points out about those who say their spending exceeds their income somewhat:

The 52 percent whose monthly spending exceeds their income at least a few months of the year rely on other means to make ends meet.

  • Thirty-six percent dip into savings to meet financial obligations.
  • Another 22 percent use credit cards.
  • Just 14 percent adjust their spending next month.

This information is somewhat troubling because it shows a clear disconnect when it comes to what is “affordable.”

The Disconnect: Can You Really Afford Your Current Lifestyle?

It’s time for brutal honesty: Can you really afford your currency lifestyle? I found it interesting that 36% of those whose spending exceeds their incomes dip into savings in order to meet their obligations. This is most likely not for emergency purposes. Indeed, it most likely a way to cover another dinner out, or some other expense that is regular — but probably shouldn’t be. However, because you might not be going into debt, it doesn’t really register that you are living beyond your means. Remember, though: your savings should be reserved just for emergencies. If you have to dip into your savings regularly, you aren’t truly living within your means.

Another interesting figure is the credit card use. It’s possible to delude yourself into thinking that you are living within your means if you are only bringing out the credit card once or twice a month, and you aren’t really too close to hitting the limit. Plus, if you can afford to pay a little more than the minimum (but don’t pay off the balance each month), it feels as though things are manageable and affordable.

Of course, the most distressing figure is that only 14% of those who overrun their incomes much of the year make changes to their spending. Instead, it’s more comfortable to dip into savings and use the credit cards. Unfortunately, these behaviors can catch up to you in the long run. Over time, these small attempts at keeping things together add up. Eventually, you will approach your credit limit, and the interest charges will become noticeable. Your savings will slowly deplete, until you realize — when you really have an emergency — that you don’t have what you need.

Take a step back and really look at your spending habits. Recognize that you might not really be living without your means, and that your lifestyle might not be so affordable after all. Create a spending plan, and then stick with it to reform your habits and get back on track.

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