Browse > Home / Misc., Debt / Are you living beyond your means?

Are you living beyond your means?

July 21, 2008

It’s a phrase I hear often. “They are living beyond their means.”

It’s also a phrase that’s been uttered more often in the wake of the housing market meltdown. Often times people are quick to blame foreclosure on the homeowner “living beyond his means.”

But what exactly does that phrase mean? How do you know if you’re living beyond your means?

Here are some key indicators that you may need to scale back your lifestyle.

·        Your housing expenses exceed 35 percent of your monthly net income. This includes your mortgage payment, insurance, taxes and utilities. You may be able to swing it if you go beyond that number, but you’re probably going to have to make some significant cutbacks in other areas of your life. Not to mention that you’re putting yourself on the brink of not being able to afford your home should you incur an unexpected life-changing event (like job less) or expense (like medical bills).

·        You’re not saving or saving very little. A good target goal is to save around 10 percent of your take home pay. If you’re saving below 5 percent that’s a sign you’ve got too many expenses in other areas. And if you’re teetering on the edge of just getting by and financial hardship, you’re going to be in even more trouble with no savings to fall back on.

·        You’re credit card balances are continually increasing. If you are using your credit cards every month and only making the minimum payments that means you are supplementing your income with credit. It’s a sign you could be living beyond your means. This is especially true if you are charging every day living expenses like gas and groceries.

·        You’re bills are out of control. An example of out of control bills would be bills you flat out can’t pay or if you’re picking and choosing what bills to pay when. You should be able to pay your bills in full and on time.

·        Finally if you have a low credit score, it could be a sign of trouble. Credit scores typically range between 300 and 850. Different sources cite different numbers as low or a sign of trouble. If your score is below 660, it’s time to take a serious look at your finances.

·        “Why 660,” you ask. We use that number because if your credit score is at or below 660 and you apply for a mortgage, many lenders will require that you complete housing counseling before they will approve your home loan. If your credit score is low enough that it is going to be a roadblock to a home loan, it is low enough that you should take action.

Did any of these indicators seem to describe you or someone you know? Keep an eye out for the next post which will address how you can work to improve your situation.

Written by admin · Filed Under Misc., Debt 

Comments

Terms of Service
1. All comments are subject to review by Advantage Credit Counseling Service prior to their publication on this site. Advantage CCS reserves the right to decline publication to any post it deems in violation of the Terms of Service.
2. No potentially libelous or damaging statements will be posted. This includes negative and / or unsubstantiated allegations against Advantage CCS and its competitors.
3. No comments including obscene, explicit or racist language will be posted.
4. Comments containing personal attacks, insults or threats will not be posted.
5. Comments not related to matters of personal finance, budgeting, credit counseling, housing counseling, bankruptcy and other related financial issues will not be posted.
6. Anyone who posts using another person’s identity will be barred from posting in the future.