Living Above Your Means: How to Break the Cycle

One of the toughest things I have ever had to admit out loud was that at one time, my family and I were living above our means. We got in over our heads trying to keep up with the Joneses and had to cut our loses big time. Even though this was a tough time in our lives, I am so thankful that we got smart enough to get ourselves out of the financial mess we were in. The sad part is, we were not alone in this problem. Over half of Americans are currently living paycheck to paycheck and struggling to get by. If you think you might be living above your means, keep reading and we’ll dive into how to know if you are living above your means and how to break the cycle if you are.

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What does it mean to live above your means?

Put simply, living above your means means that you are spending more on your lifestyle than you can afford. Often times this comes in the form of major debts like student loans, credit cards, and/or too high of a mortgage or rent payment.

If you are one of the millions of Americans who are living paycheck to paycheck, there is a good chance that you are also living above your means. However, living paycheck to paycheck doesn’t necessarily mean you are living above your means. You may be living within your means, but are just not managing your money well.

So, what’s the difference?

How much should you be living on?

There are some basic budgeting percentages to go by to help you know whether or not you are living within your means.

Here is an idea of the percentage range you should find yourself in:

Housing: 25%
Insurance: 10% – 20%
Food: 10% – 15%
Utilities: 5% – 10%
Savings: 10% – 15%
Fun: 5% – 10%
Clothing: 5%

How to Calculate Percentages Spent from Budgets

What if you’re living above your means?

Take the time to dig through your spending over the last few months to see if there is a particular area of your budget where you are living above the recommended budgeting percentages.

When it come to these percentages, the toughest area to deal with is housing because chances are you are locked into a mortgage or a lease that you can’t quickly get out of.

If that is the case, don’t worry, we will dive into other areas of your budget where you have a lot more wiggle room.

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Calculate your debt

One of the biggest problem areas most people face is spending too much of their income on debt.

Debt should be the first area you really take a look at when it comes to your budget because paying off debt has the potential to be one of the best ways to get money back in your life for good.

After calculating how much money you spend each month on debt, take a moment to consider what it would mean for your life, your budget and your paycheck to paycheck lifestyle if you had that money back in your pocket each month!

Calculate your small spending

The next biggest budgeting struggle for most people is the small, unplanned, day to day spending.

Take a moment to go through your budget for the last 3 months to see how much you are spending on average on small, insignificant (and unplanned) purchases. —Don’t forget to add in the expenses that you might be putting onto credit cards!

This number can be an extremely shocking number to see. So often we go through our lives making small purchases less than $10 without realizing how big of an impact it’s making on our budget.

Find ways to cut your budget

Once you have a good grasp of your spending habits and where all of your money is going each month, see what you can do to tweak your budget to benefit you.

If you are living above your means or living paycheck to paycheck, it’s time to start trimming the fat in your budget. That means cutting cable, canceling unused subscriptions and memberships and eliminating unnecessary spending.

Easy ways to cut your spending:

Aaptiv – You can get total fitness, meditation, yoga and other workouts connected right to your phone for only $15 per month! Get your first month free!
Chewy – Save a ton of money on products and food for your pets and set up automated shipments so you don’t have to pick up anything from the store! Sign up for Chewy!
Mohu – Getting a digital antennae through Mohu can save you thousands of dollars, plus they make it easy to connect through your entire house.
OhmConnect – OhmConnect is a company that gives you rewards for saving energy! They offer energy saving events to help you save on the cost of your energy bills and in some states will actually pay you for participating! See if you qualify!
Ting – Ting is a great way to reduce your mobile expenses each month. You could easily reduce your phone bill by OVER half. Try Ting now.
Trim – This app takes a look at your spending habits and instantly finds different areas where you could be saving money! See where you could be saving.

Get a game plan

Okay, so you know your numbers and you’ve got some ideas on how to reduce your spending. From here, it’s time to get a game plan for debt payoff and smarter budgeting.

Debt payoff

My absolute top recommendation for debt payoff is the Debt Snowball that Dave Ramsey talks about. Check out the full video tutorial on how to get started.

Budgeting

Okay, you’ve worked through your spending, got a plan for debt payoff, now it’s important to create a solid budget that works! You can use all the printouts from the Fun Sized Budget Bundle workbook to help you!

Remember, there are super important things that you want to make sure you are including in your budget. See the 38 Things You Might Not Be Budgeting For.

When to side hustle

Believe me, I understand how scary figuring out all of these numbers can be! That’s why it’s important to be aware of when it is time to create an additional income for yourself in order to improve your finances and get yourself out of debt faster.

If you have crunched all of the numbers, planned out a budget, and still do not have enough money to survive, then it’s time to consider downsizing or finding yourself a side hustle.

Quickest Side Hustles to Make Money:

QKids – No degree? You might be in the clear. With QKids you can earn $16-$20 teaching English online and if you have experience with kids, you may qualify!
Sell on Amazon – Check out this beginners guide to learn how to get started selling with FBA.
Rover – Watch dogs or walk dogs and get paid for it!! Or get a $20 credit for your dog!
Uber – Become a driver with Uber. Set your own schedule and get paid up to 5 times her day along with chances for additional incentives in your city. Check it out!
UberEATS – Earn extra money when you need it, day or night and deliver food instead of people! Check if UberEATS is in your area.
VIPKid – If you have a bachelor’s degree you can make between $17 and $22/hr by teaching English online in over 32 different countries!

Stick with it

No matter what, making big changes can be tough. There will definitely be setbacks but don’t ever give up! If you are living above your means, it is crucial to your success and happiness that you get a solid plan in place to help you stop living above your means, ditch the paycheck to paycheck life and start living a life with more financial freedom!