1. People influence your spending

This is one of the clearest signs you are living above your means. Are you swayed by your friends or family to spend money on things you have not planned for? It could be going out to dinner, buying the latest phone or even going on an unplanned vacation.

Many of us do this because we do not want to miss out on things and experiences with the people we love. Memories are great, but if you want to have a better relationship with money, meet your financial goals and stop living above your means, you need to be very intentional with your finances.

You could start by reducing your time with your extravagant friends/family or being honest with them about your new adjustments. They need to respect your decisions, or you may have to find like-minded friends/family who shares the same financial goals with you. Having financial discipline and practising self-restraint is a good start to living within your means.

2. You own a car or a house you cannot afford

A car or a house you cannot afford is a sign that you are living above your means. If you live in a 3 bedroomed house or own an expensive car, while your salary indicates that you cannot pay for them, then you are living above your means.

Perhaps you may have had to take off a hefty mortgage loan to buy your dream house and now you cannot afford to pay it off. Or this new car you just bought is costly to maintain or service. You can let them go if you want to grow yourself financially. It will not be worth it to get all that societal prestige and recognition whilst you are strapped for cash and heading to financial ruin.

3. You cannot pay your bills on time

If you cannot pay your bills on time, then this is a sign you are living above your means. This includes rent, utility bills and any debts you owe. Having to always avoid paying bills or asking creditors to give you extra time to pay your bills is a giveaway sign you are living above your means.

Living within your means does not have to worry about paying your bills before the due date. And if you cannot pay your bills on time, it is not because you don’t have the money to settle your bills, but because remuneration has been delayed.

4. You are spending more than 25% of your income on rent.

It is recommended that the amount of money you need to spend on rent should be less than 25% of your monthly income. Anything above that is a sign that you are living above your means. A lot of us don’t know this golden rule. We want to consider other factors for choosing a place to live, like safety and accessibility and forget about the rates for living in that area.

Do the math now and find out if how much you pay as rent shows you are living above your means or not. Being independent is great. Having your own house is greater. But if it’s difficult for you to make any financial progress because of this, you are better off looking for ways to live within your means, like staying with your parents or relatives or even getting a shared apartment with a friend and sharing the costs.

5. More than 28% of your income goes to your house

As a rule of thumb, not more than 28% of your income should go to your housing expenses. These expenses include all utility bills like gas, heat, electricity, and water. If you cannot keep your housing expenses at or below this percentage range, then it is a sign that you are living above your means.

For example, if you are living in a high-end area and you find yourself complaining about how expensive the water bills or electricity bills are, you need to evaluate your lifestyle and housing needs. For starters, you can start house hunting for areas that have affordable utility rates. This is a harsh truth and can be a bit difficult to achieve, but downgrading your lifestyle only means you are living within your means, right?

6. You don’t have an emergency fund

You may face a difficult period of need that requires immediate financial attention. If you do not have an emergency fund to take care of these risky unexpected life events, then you are living above your means. An emergency fund or a rainy day fund is any amount of money that you set aside to help you in case life’s curveballs threaten your finances.

You could lose your job today, have a medical emergency, have to plan for a funeral or take a salary cut. If you don’t have an emergency fund to last you for the next 3 to 6 months before you get back on your feet, you may be forced to downgrade your lifestyle because you cannot take care of these financial risks. This is a sign that you are living above your means.

7. You are not saving or investing

How often do you save your money? How much do you set aside to save or invest every month? If you do not save or invest your money, you are living above your means. Most people who can’t save or invest always say that they have a lot of bills to settle and end up being left with nothing to save or invest.

You should be able to save and invest some money for your future despite the endless bills and debts. Saving and investing are very good financial practices that will propel you towards meeting your financial goals. For example, you can start investing in long-term assets like stocks on HisaApp and trade in the US markets.

Financially successful people save at least 10% of their income every month. If you can do this, then you’ll stop living above your means.

8. You are living paycheck to paycheck

Living paycheck to paycheck is another clear sign that you are living above your means. You can barely make it through the month until your next salary when you live paycheck to paycheck.

Every shilling of your current paycheck is immediately used to pay for rent, groceries and other utilities, and you’re left with nothing before the next paycheck. Money is always tight at the end of every month.

If this is where you are, you are living above your means. Some of the major reasons people live paycheck to paycheck are that they want to live a lifestyle they cannot afford, do not budget, and have general poor financial habits. Living paycheck to paycheck is frustrating and a big hindrance for anyone who wants financial freedom.

9. You are spending more than you earn

This is easy to spot. First, you need to establish how much money you receive on a monthly income. Next, calculate your total expenses for the same month. You can do this on an excel spreadsheet. Primarily focus on the large expenses, but do not forget about the smaller and miscellaneous expenses.

If your expenses exceed your overall income, you are living above your means. You may want to cut down on things you do not need in your expenses list and budget your money to live a comfortable financial life.

10. Your financial decisions are influenced by future prospects e.g. bonuses or promotions

Many of us make financial decisions based on the money we expect to come in the future. We will take a huge debt and go on that expensive vacation because your boss promised you a promotion, which means more money, right? If you are a victim of this, you must stop living above your means.

Do not rely on that bonus or family inheritance to up your lifestyle and get yourself things you cannot afford. Work with what you have. Take one step at a time. When you finally get that bonus, you can use it to buy that new car or go on that vacation.

11. You take out loans to upgrade your lifestyle

iPhone just released its latest iPhone14, the most coveted phone in the market right now for all iPhone lovers. While some people can upgrade to this new phone without breaking a sweat, if you are taking out loans to do this, then you are living above your means.

Whether it is that TV set you’ve wanted, a bigger house or new home appliances, make sure that you can comfortably upgrade your lifestyle without loaning your way into it. You will have massive debts that will be difficult to pay off, leaving you in financial ruin.

12. You do not budget

Budgeting simply means coming up with a plan on how you intend to spend your income. With a budget, you have a list of your expenses, allocate a portion of your money that meets them, and then balance it out. A budget is good because it helps you know what you do not need and track your expenses.

When you budget, you are more intentional about your money and focused on your financial goals. You can use many different budgeting techniques, for example, the zero-based budget, pay-yourself-first-method, 50/30/20 rule and cash envelope method. Find out what works for you and use that to up your financial lifestyle. Remember, you must be self-disciplined if you want to follow your budget and live within your means.

13. You don’t track your expenses

I’ve heard many people talk about how they do not know where their money went after a series of poor financial choices. “ I don’t know where my money went. It just disappeared.” This cannot be further from the truth.

If you can not point out where your money has gone and how you have used it, then you are treading very dangerous waters. You could be throwing away a lot of money without even knowing it. You need to stop living above your means and know where your money has gone at the end of the month.

14. You don’t pay off your debts

Getting into debt is frustrating and humiliating. Yet some of us do this, either subconsciously or consciously to ourselves. If you are strapped in heavy debt, and it is seemingly impossible to get out of it, then it could be a sign that you are living above your means. Perhaps you are taking out a loan to pay for something you do not need.

If you have already maxed out your credit card, you have borrowed from all your friends and you have used all the loan apps, you need to evaluate yourself and find out if you are living above your means. If you have an old debt that just won’t go away, chances are you are not planning your finances effectively.

When you live within your means, you do not have to worry about getting debt collection calls or being blacklisted by your creditors.

15. You are not saving for retirement

No one wants to work until they die. Financially successful retirees usually speak about how living within their means in their youth helped them save for retirement.

They used the money to save for an emergency fund and plan for retirement. When you grow old, you become very vulnerable to health complications and managing your finances better now is one way of taking care of your future self. Always look at things long-term and make sound decisions, like living within your means if you want to succeed in the future.