You like the finer things in life. You think of life as something to enjoy. When you go on vacation, that means staying at nice hotels and spending weeks on the road. When you buy a new car, you want a luxury sedan. When you go out to eat, you always look for trendy, upscale places to check out.
There's nothing wrong with wanting to get the best out of life. But it can become a problem if you are living beyond your means.
The credit impact
It used to be harder to live beyond your means. You could only spend what you earned. Sure, you could spend all of it, but that was the end.
These days, with credit cards so easy to get, you can make impulse decisions. You can buy things you know you can't afford, deciding you will just deal with it in the future. Then the future comes and you have no way to pay -- as you knew all along. Credit gives you the ability to make poor financial decisions and give in to your desires and impulses.
How do you know?
So, how do you know if you're just enjoying life to the max or setting yourself up for future financial ruin? Here are a few red flags that could mean you started living beyond your means, whether you meant to do so or not:
- The fear of missing out on a good time leads you to pay for everything, all the time.
- You can never pay your credit card off, you just make the minimum payments, and you let the balance carry over.
- You get overdraft fees on your checking account, or you have checks bounce.
- You live without a budget, just hoping you can pay everything off from one month to the next.
- You have no savings at all. You spend 100% of your money, not even putting away 5% per month for later.
- Since you have no savings, you also do not have an emergency fund. If anything goes wrong -- say your roof leaks -- you can't pay to fix it.
- When the month ends, your bank account is empty. You scrape by, but you have nothing left. This can happen at almost any income level.
When you see these signs -- especially if you see more than one -- then it may mean you have begun living beyond your means. You could find yourself facing bankruptcy in the future if this lifestyle continues. If that does happen, make sure you know what steps to take.