Spending all that you have worked for in a split second without realizing it, is an obsession a lot of people are combating with. They spend money on frivolous items, varying from acquiring expensive phones, changing their closet, and purchasing a high-priced handbag. Though these items seem essential, however, it is imperative that one apply prudence while at it to avoid living beyond their means.
You can read our previous article on Lifestyle Inflation Here
Lifestyle inflation has no guide, and you can develop the habit without realizing. Here are some examples to alert you that you are living beyond your means and ways to change the precarious behaviour to avoid going bankrupt and to aid you on the right track towards achieving financial freedom.
1. High accommodation
In some places in Nigeria, rental and mortgage are very expensive. The reason is because of Estate settings, unlimited power supply and security provisions. Though, this is true does not mean you have to spend almost your annual salary to live in those locations. Personal finance experts usually advised that your housing should not be more than 28% of your income, and if your housing is above this percentage it simply means you are living beyond your means. Nevertheless, if you find yourself in this situation, you can consider the following:
- Downsizing your rent pay by moving to a comfortable and affordable area.
- Having another means of income to enable you sustain the high rent.
- Getting a roommate that you can split the rent with.
2. Buying a Car
Acquiring a car is a necessity. There is thumb rule in place of not spending a half of your annual household salary on a car. For instance, if an individual is earning 2 million a year should at best buy a car worth 1 million. However, make sure it is a used car and a brand-new car. I will advise that you spend only what you can truly afford.
Read Also: How to prioritise your needs over wants
3. Extravagant Lifestyle
Living an extravagant life has been a major way people live beyond their means. They spend a lot of money on themselves and on their friends every weekend that they sometimes end up not having cash on hand for their household expenses. A way to tell if this is happening is to think about your current spending situation and calculate your spending expenses. Look back over your purchases for the last month. For example, excessive eating out, spending so much on friends, clubbing and shopping. After this, look around at the rest of your life, and if you struggling to pay your utilities/ household expenses, it is time to change the situation to take better care of your money.
4. Living on Paycheck to Paycheck
It is possible to work for a month, make good money, and still feel that you do not have enough. It usually happens when you do not save much but spend everything that comes into your account. Most people in Nigeria live on paycheck to a paycheck basis. It is easy to feel trapped due to expenses, especially when you are just maintaining a lifestyle and not growing wealth. You can fix this by cutting back on unnecessary purchases, develop the habit of saving, from there you can begin to invest.
5. Lack of Budget
If it seems that you are always looking at your bank account, wondering where your last salary went, you are not alone because you might be living beyond your means. Not being sure how you spent money so quickly are signs that it is time to take a second look. If you want to get your money organized, having a budget is the first thing to do. How do you get started? Begin by listing your bills and expenses one by one and marking down how much each one costs. Then plan out where you want your money to go and strictly abide by it
6. Playing the Comparison Game
Perhaps your colleague bought a new car, or your friend buys a larger, more expensive house. You then feel that you should have what they have, even if your situations are very different. Comparison can lead you down a dark path quickly. Instead of comparing your life to others, choose to be happy about what you have and work towards what you want. Remember that your journey is not anyone else’s, and because of that, you can be excited about your own life without looking at what others have.
Read Also: 7 Reasons You Need to Start Getting Thrifty
In conclusion, living beyond your means is something that can happen to anyone. What matters is what you do once you realize it. Changing your habits and lifestyle might seem difficult initially, but you will find it is worth it. Begin budgeting, saving, and investing. Once you see some progress toward your goals, you will be on your way to living a much better financial life.