How to know if your spending exceeds your income.
1. You’re Living Paycheck to Paycheck
If you’re left with little or no money after paying your bills, you’re not alone. See the article : Why people are spending less on video games in 2022. According to LendingClub’s 2022 survey, approximately 64% of American adults live paycheck to paycheck.
This is not just a problem for those on low incomes. The same survey found that 49% of adults earning more than $100,000 a year were living paycheck to paycheck. If you can’t afford to put money into savings or retirement, you may not be able to afford your lifestyle.
Take our poll: Do you think you’ll be able to retire at 65?
2. You Can’t Afford an Emergency Expense
One of the side effects of living paycheck to paycheck is that it can be difficult to build an emergency fund. On the same subject : Travel can be disrupted in Europe this summer, so plan carefully. According to a 2022 Bankrate survey, only 39% of Americans can comfortably afford to cover $1,000 in emergency expenses.
Unfortunately, many people don’t realize this is a problem for them until an emergency occurs.
“We tend to see this in emergencies, when something happens to a car or some accident causes unexpected costs – like a basement flood or a pipe burst,” said Clinton Smith, chief executive of pensions and social services firm Government & Services for civil servants. “Being prepared for the unexpected is a great way to break this cycle. Always have a reserve fund of money in case you need it.”
3. Your Credit Card Debt Is Increasing
Life happens and big expenses like medical bills and appliance repairs are sometimes on the credit card. This may interest you : According to the NPD, US spending on video games fell 13 percent in the second quarter. The problem is that defaulting on credit card payments causes their interest to accrue, which can quickly add to your debt.
Jason Noble, a financial advisor at Prime Capital Investment Advisors, sees this problem all too often.
“As inflation continues to rise, we’ve seen an increase in credit card debt as a way to manage higher costs,” he said.
If you can’t seem to keep up with your credit card payments, you may need to see what fees you can do without.
4. Your Income Decreases but Your Spending Doesn’t
An emergency fund is a useful way to pay bills if your income drops due to job loss. But your savings can’t sustain you in the long run if your expenses continue to exceed your income.
Charisse Mackenzie, financial advisor and president of Saturn Wealth, remembers one couple she worked with who faced this problem. Both worked in the medical field and were used to earning high incomes. When one of them retired, they didn’t want to give up their lifestyle.
“They started withdrawing $12,000 a month from their investment accounts to maintain the lifestyle they were used to,” Mackenzie said. “We ran the numbers for them in our income report and found that at this rate of spending they will be broke in less than 10 years.”
Mackenzie explained to the couple that they had to cut back on their spending or the retired partner had to go back to work.
5. You’re Hiding Your Spending Habits
If you find yourself hiding your purchases from a loved one or significant other, ask yourself why. Could this be a sign that you are feeling guilty about spending more than you can afford?
Noble recalls one couple he worked with who had a combined annual income of $175,000. He said they also have a decent mortgage, regular car payments and $5,000 in credit card debt. But something was wrong with the numbers – and he couldn’t figure it out.
Noble recounted his meeting with the couple: “Finally, the husband said, ‘I have a secret credit card that’s $35,000 in debt.’ As tears welled up in his eyes, his wife replied: ‘I also have a credit card that I’ve been hiding from you, and it has $25,000 on it.” This is an extreme example, but it shows how easy it is to hide. your expenses than to disclose them.”
6. You Can’t Keep Up With Multiple Lifestyle Debts
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