How to Get Back on Track If You're Living Beyond Your Means

Do you have a growing suspicion that you may be living too large? If so, you’re not alone — a recent survey found that 54% of Americans live paycheck to paycheck.

It’s easy to assume that this happens because you don’t make enough money, but it’s a problem many high-income earners struggle with as well. The survey also found that 40% of people who earn over $100,000 annually are living beyond their means.

Fortunately, there are steps you can take to turn things around if you’re living beyond your means. This article will outline seven steps you can take to get back on track.

Signs you’re living beyond your means

If you’re living beyond your means, that means you’re spending more money than you’re earning each month. This usually happens when people rely on credit cards to cover their monthly expenses.

This process usually starts small and escalates over time, quicking becoming unsustainable. Here are some signs you may be living beyond your means. 

You’re living paycheck to paycheck

If you’re living paycheck to paycheck, you’re constantly scrambling to make ends meet. You likely spend your paycheck the minute you get it, and you may run out of money well before the month is over.

Eventually, you may get to the point where you struggle to even cover your monthly bills. When you live paycheck to paycheck, you can never get ahead financially since there’s never any extra money to put towards savings.

Your credit score keeps dropping

Your credit score is kind of like a barometer for your overall financial health. It tracks things like your credit utilization ratio, whether or not you pay your bills on time, and the variety of credit accounts you have open.

So if your credit score starts to drop, this could be a sign you’re living beyond your means. A good FICO score is at least 670 or higher. If your score falls below 580, it’s considered poor, and lenders will consider you a high-risk borrower.  

You keep getting charged overdraft fees

An overdraft fee is a charge you receive when your bank account is overdrawn. It means there’s not enough money in your account to cover any additional expenses.

The occasional overdraft fee happens, so you don’t need to beat yourself up if it happens once or twice. But if you keep getting hit with repeated overdraft fees, this is a sign you’re living beyond your means.

You don’t budget

And finally, it’s hard to live within your means if you don’t have a budget. A budget is kind of like a blueprint for how you spend your money. It ensures that you’re meeting your monthly expenses and planning for the things that are important to you.

Some people don’t budget because they think budgeting will be complicated or difficult. But the opposite is actually true — budgeting simplifies your financial decisions because you always know what you can and can’t afford. 

7 ways to stop living beyond your means

So now that you know what living beyond your means looks like, how do you get yourself back on track? Knowledge alone is not going to be enough — you also need to take action to fix the problem. Here are seven steps to get you started.

1. Spend less than you earn

The only way you will ever get ahead financially is by spending less than you earn. And the only way you can do this is by — you guessed it! — coming up with a budget and tracking your spending.

Use an online budgeting app like YNAB or Mint and figure out exactly how much income you can expect to receive that month. From there, you’ll plan out your necessary monthly expenses.

Your most important expenses include things like rent, food, and gas. Once you’ve covered everything you need to live on, you can begin to budget for recreational costs, like eating out or entertainment.

2. Audit your spending

If you earn enough money to cover your monthly bills but still find yourself short each month, your spending may be the problem. The best way to correct this is by auditing your spending.

Track your spending for a month so you can see where your money is going. At the end of the month, go through your spending and look for any areas you can cut.

Are you paying for a gym membership you never use? Are you spending way too much money eating out every month? Auditing your spending will help you figure out where you can scale back.

However, auditing your spending is not a one-time occurrence — you should do this on a regular basis. A spending audit will help you avoid lifestyle creep and stay on top of your financial goals.

3. Increase your income

Ultimately, there’s a limit to how much you can cut from your budget. And if your budget is stretched so thin that you can never allow yourself any extras, you’re going to have a hard time sticking with it.

So at some point, you may need to start thinking of ways to increase your income. The best place to start may be to look for opportunities to earn more money at your current job. Is there any way you can take on extra hours or more responsibility for a higher salary?

If you’re maxed out at your current job, you can look for another better-paying job. You can also consider taking on a side hustle in your off-hours.

You could drive an Uber, deliver groceries with InstaCart, or give freelancing a try. The options for ways to earn extra money are endless.

4. Don’t rely on credit cards

If you’re living beyond your means, it’s a good idea to stop putting money on credit cards. Credit cards are an attractive option if you regularly find yourself short on cash flow, but you’re only covering up the problem.

Plus, credit cards are an unreliable way to make your monthly payments. Your credit card company can lower your credit limit at any point without giving you an advance warning.

And if you only make the minimum payments each month, you’re going to end up paying a lot of money in interest. So commit to only paying in cash and eliminating credit cards as an option to cover your monthly bills.

5. Build up an emergency fund

It’s only a matter of when, not if, an emergency strikes. Your car may break down, your dog may need surgery, or you may get an unexpected tax bill. And if you don’t have the money to cover these expenses, it can be very stressful.

That’s why you need to start saving an emergency fund. If you don’t have any savings, start with a $1,000 emergency fund — that’s enough to cover most emergencies. Once you have $1,000 saved up, aim to save at least six months of your income.

6. Pay down your debt

Once you’ve saved an emergency fund, it’s time to start paying down your debt. And this starts with you figuring out exactly how much debt you owe. This is called your debt number.

Add up everything you owe to your creditors — credit cards, student loan debt, auto loans, etc. Create a basic Google spreadsheet and add up everything you owe. From there, you can start tracking your balances from month to month.

Here’s an example of what that will look like:

7. Make a commitment to yourself

And finally, you’re going to have to make a commitment to yourself to stop living beyond your means. Identify what the biggest problem is in your financial life and commit to fixing it.

If you earn enough money and your problem is overspending, do a spending audit and commit to sticking with your budget every month. If you’ve already cut everything you can from your budget and you’re still struggling, you may need to look for ways to earn more money.

Making any big change in life will be difficult, and you may not get it exactly right at first. But by taking small daily actions toward your goal, you’ll continue to see your financial situation improve over time. 

The bottom line

It’s easy to live beyond your means, but over time, this behavior will start to catch up with you. Pay attention to the signs that you may be living beyond your means.

Commit to sticking to a monthly budget, so you have a plan for spending your money and avoid putting purchases on credit cards. Making good financial decisions is the best way to avoid lifestyle creep and make progress toward your financial goals.