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Are You Living Beyond Your Means? Three Ways to Tell

So, how are you doing these days? Financially, that is.

Although the unemployment rate seems to be falling, there are still a whole bunch of Americans struggling mightily. Are you one of them?

Maybe you’re not sure how you’re doing.


WELL, according to a piece over at CNN Money, there are three good ways to tell if you happen to be someone living beyond their means.

First, you have a low credit score. If you do, that’s a good indicator that you’re just not doing a good job managing your inflow and outflow. Perhaps the two biggest influences on credit score are payment history and debt utilization, which is the percentage of available credit you’re actually using. If your score is low, it’s likely that you’re racking up a lot of debt to pay for everyday kinds of expenses that you can’t cover directly from your regular income. It stands to reason that you’re not always able to make the payments on that debt in a timely fashion, either.

Something else that can be a dead giveaway: More than 30 percent of your paycheck is devoted to meeting your housing costs. Housing costs, in this case, refer to mortgage payment, homeowners insurance, and property taxes. Ideally, those expenses will be as small as possible, but they really should never be over 30 percent of what you’re bringing home each month. The CNN Money article notes that between 2011 and 2014, over half of all Americans had to “make at least one major sacrifice” in order to meet housing costs. These sacrifices included dropping healthcare coverage and forgoing retirement savings.

The third way to tell if you’re in over your head is that you’re simply not saving any money. One guideline says that you should be socking away 10 percent of every paycheck, which is hardly a significant sum. If you can’t do that, you’re not getting by as you should.

If you’re in this boat, it’s no secret what the solution is. You need to either start making a lot more money right away, or cut your expenses/change your lifestyle such that each of these “signals” disappears. Once they’re all gone, you can be confident that you are living well within your means, and making forward, functional progress.

By Robert G. Yetman, Jr. Editor At Large