Are you living beyond your means? If you don’t know, you’re in the same boat as a lot of people. Here's some factors to consider to figure out if your living within your means or beyond them.

Factors like easy access to credit cards and the ability to buy almost anything online have resulted in more people overspending than ever before. In fact, many people might not even realize they’re digging themselves into a hole until they’re thousands of dollars into debt.

If you’re worried about whether you’re living beyond your means or not, don’t panic. Instead, keep an eye out for some signs that you’re spending more than you earn.

Check Your Credit Score

One of the easiest ways to tell if you’re spending beyond your means is to check your credit score. Your payment history and loan balance constitute 65% of your score, so if you’ve been taking on debt and only making the minimum payments to your creditors, your credit score will suffer. If your credit score is below 600, you should be worried.

It’s worth pointing out that you can check your credit score for free when you log in to your First Alliance online banking account or mobile banking app.

How Much Do You Save?

If you have a job, you should be saving part of each paycheck to build up your savings account. If you don’t feel as though you have any money to save out of each paycheck or that you don’t make enough to save in general, that’s probably because you’re spending too much.

If you don’t feel as though you can save any money, try this simple experiment: when you get your next paycheck, put 5% of it into a savings account. For example, if you get $1000 every two weeks, put $50 away. You shouldn’t miss that money, and if you need to withdraw it in order to make ends meet, you’re definitely living beyond your means.

How Do You Use Your Credit Card?

One of the most common ways people live beyond their means is by using their credit cards indiscriminately. Ideally, your credit card balance needs to be paid off in full each month, but if you’ve used your credit card to finance a major purchase, you need to be sure you can pay off that expense completely in two or three months’ time. If you can’t, you’re probably spending more than you’ve earned.

Using your credit card to pay your grocery and utility bills is another red flag that you’re living beyond your means. If you can’t cover basic necessities with your paycheck, you need to take a long, hard look at your finances.

How Do You Stop Living Beyond Your Means?

If you do discover you’re living beyond your means, it’s natural to be scared and worry not just about how much you owe, but also how you’re going to be able to afford everything you want without relying on credit cards or loans.

If you are frightened, don’t worry. If you’re in debt, you can get out of it. Many, many people have done so. Many people also live comfortably within their means, especially when they have gotten out of debt and gained control over their money. All you have to do is commit to taking the following steps.

The first step you need to take is make a budget. If you’ve never created a budget before you might be intimidated by the process, but it’s actually pretty simple. All you have to do is add up all the money you spend each month, then subtract that amount from how much you earn each month.

If you have a positive number, you’ve got a surplus. If you’re living beyond your means, though, you’ll probably have a negative number, and you’ll need to figure out what budget items you can cut back on in order to make sure your budget is balanced.

Once you have a balanced budget, you can take the next step—build up your savings. You’ll want to start by dedicating at least 10% of your paycheck toward an emergency fund.

Ideally, you should save until you have at least three months salary saved up. After that, you can start using the money you were putting in your emergency fund to fund your future financial goals, like your children's college fund or your retirement.

Finally, start paying off any debts you have. If you do have any debt, make paying it off a top priority. Start with the debt that has the highest interest rate first, then work your way down from there. You might also want to consider getting a debt consolidation loan in order to reduce the number of payments you have to make each month, as well as potentially reduce how much interest you’re paying on your debts.

Get Control of Your Money With First Alliance Credit Union

Nothing can ruin your finances as fast as living beyond your means can. However, once you know the warning signs, you’ll be able to stop living beyond your means and start getting control of your money.

You can also get control over your money more effectively when you become a member of First Alliance Credit Union today. You can use the free budgeting calculator in our resource center to help you get started budgeting, as well as take a look at our free beginner’s guide to budgeting that tells you everything you need to know about how to create a budget and stick with it.

You can also kickstart your savings by opening up a traditional savings account with one of the best interest rates in the area, and even talk with a lending advisor about whether a debt consolidation loan might benefit you.

Want more information about signs you're living beyond your means? Listen to episode 57 of our Good Money Moves podcast that goes in-depth on signs you're living beyond your means.