It's easy to find yourself living above your means and spending more than you should every month. Trying to keep up with more than you can afford isn't just frustrating, it can also have some big long-term consequences on your ability to retire, live comfortably, and meet your goals.
Living above your means often comes down to overspending. Luckily, it's possible to reverse it with some planning and effort.
If you feel like can't afford your lifestyle, there are some obvious signs that will show up every month. Here's what you might notice.
1. You don't spend based on a budget
Keeping a budget is critical to saving. It makes sure money is being saved, spent, and invested appropriately every month to stay on track for long-term goals. Not knowing how much you have left to spend or save on any given day can mean that you're spending more than you should.
And, it doesn't necessarily mean having a spreadsheet of every dollar spent each month. Budgeting can be as simple as knowing how much money you have to spend each day. Calculating a "daily rate" could be a good idea — this budgeting method breaks down how much is available to spend each day based on income and expenses, financial coach Holly Morphew previously told Insider.
To break it down, divide your take-home pay by 365. Then, add up all of your monthly fixed expenses like housing and consist ant bills, and subtract that by your daily earnings. Then, monitor spending by staying under that daily limit. It's a simple method that helps you avoid overspending without complicated categorical budgets.
2. You constantly have credit card debt
Credit card debt doesn't always mean that you're spending more than you should — sometimes, credit cards are necessary in a pinch or for emergencies. But, consistently carrying a balance due to non-essential purchases could be a sign of a bigger problem. High interest rates on credit cards can snowball debt, and make it harder to pay off. And, if you're spending so much that you can't fully pay off your card each month, it's a sign that you can't afford your lifestyle.
Having a budget and sticking to it can help prevent this problem in the first place. Making a schedule for your credit card payments can help you make make payments on time, and being conscious of your daily spending can help you avoid overspending.
3. Your emergency savings don't match your lifestyle
If you haven't increased or built your emergency funds to fit your lifestyle, you might not be able to truly afford it in the first place.
While having an emergency fund is a starting point, that fund should grow to match your spending and needs. Many financial experts recommend having an emergency fund worth six months of expenses. When your monthly expenses increase, that means your savings should, too. If you've recently gotten a bigger apartment and increased your rent, gotten a new car with a larger monthly payment, or taken on other new debt, those things should be factored into the amount you have saved in your emergency fund.
The same goes for emergency funds kept for home repairs and maintenance. Saving 1% to 4% of a home's value per year is an essential way to make sure that you always have enough on hand for any expensive emergency home repairs. When you upgrade your home, you should consider growing this account, too.
4. You're not on track to have enough saved for retirement
If you're spending too much on your lifestyle, you may be overlooking your retirement savings.
While there's no set rule on how much to have saved, experts agree that there are some benchmarks to aim for. Ideally, you have one year's salary saved by age 30, two years' salary by 35, three years' salary by age 40, and six years' salary by age 55, Insider's Laura Grace Tarpley reports.
If you're still a ways away from these benchmarks, you probably still have time to save. And, the sooner you start, the easier growing your savings will be. An easy way to do it is to use your employer's 401(k) plan, if it's available. With this method, the money goes directly from your paycheck to your retirement savings, so it's money you'll never miss.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.