Bankruptcy is more common than most people realize… In today’s world, it’s far too easy to accumulate overwhelming debt and lose control. While an unexpected bump in the road (like an automobile accident or loss of a job) can lead to a bankruptcy situation, many times, people start down the road to bankruptcy because they are simply living beyond their means.
If you’re spending more money than you are making, you are living beyond your means. Society pushes for instant gratification and a “you only live once” mentality – but that’s not a great strategy for handling your debts.
It does not take much to start living beyond your means, and many times, it’s the beginning of a downward spiral that cannot be stopped. Once the debt starts to multiply, it is harder and harder to find your way out of the difficult situation you’ve put yourself in.
The best way to avoid losing control of your debt and finances is to keep yourself from living beyond your means. If you pay attention to the following warning signs, you’ll stay on firmer financial grounds:
You are living paycheck to paycheck
If you’re finding that you are running out of money just before every payday, that is a clear sign that you are spending more money than you are making. Sure, you might be able to skate by for a few months, but if you are stretching yourself that thin on a regular basis, even a small unexpected expense can wreak havoc on your financial situation.
You use credit to pay for cash items
You should buy everyday items like food and gas with cash, not credit. If you stick to a well-planned budget, you should have plenty of cash to pay for day-to-day items. If you are using credit cards for daily necessities, this could be a sign that you are living beyond your means.
You continue to carry debt
This is the most important sign that you are living beyond your means. If you carry your debt from month to month, that is incredibly bad for your finances. You should never carry ANY credit card debt for more than a year. Really, you should only use your credit cards for big-ticket purchases, and you should pay them off as soon as possible.
You have nothing in savings
An emergency savings account is a vital piece of any good financial plan. While some people only keep a few thousand dollars in their emergency fund, we suggest putting aside 5 to 6 months of expenses. If you have nothing in savings and aren’t contributing to a savings account on a monthly basis, this could be a sign that you are living beyond your means.
You are not contributing to a retirement fund
Unless you are starting late in life, you should contribute 10-15% of your income to a retirement fund. At a bare minimum, you should set aside 5% of each paycheck for retirement. If you are spending frivolously, you won’t have money left for retirement savings. Cut your spending and start saving for retirement!
Living beyond your means can quickly lead to out-of-control debt, which can easily lead to bankruptcy. If you pay attention to these five warning signs and set a realistic budget, you can adjust your spending habits and avoid a debt spiral that leads to bankruptcy.
If you are already in financial trouble, or you are worried you might already be past the point of no return, call us today at 214-760-7777 to schedule a free consultation. We’ll explain all of your options and help get you make the right decision to set you on the path to a fresh start.