4 Signs You’re Living Too Far Below Your Means — And Can Afford More
We hear all the time about how we should not be living beyond our means. You want to have a good credit score, not live paycheck to paycheck and be able to save. But what if you’re living too far below your means?
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Living far below your means can be a problem when you’re making money and not enjoying it. It’s often a stress response to having a difficult financial time in the past. But if you’re reading this, here’s your sign to let go a little and appreciate the fruits of your labor.
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Your Largest Expense Is Your Savings
When you look at your budget, if the bulk of what you “spend” your money on is investments or savings, you’re living too far below your means. This means you could be using that money to enjoy life. It’s a good idea to save, of course, but the rule of thumb is to save 20% of every paycheck.
This budgeting rule argues that you should spend 50% of your income on what you need (rent or mortgage, utilities, food, insurance, etc.), 30% on what you want (vacations, luxury items, etc.) and 20% on savings and investments. It’s one thing if your split is a little different from this one.
However, if 50% or more of your income gets put away for later, you could likely afford to enjoy your life a little more.
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You’re Paying Way Too Much in Taxes at the End of Each Year
For many people, when that tax bill comes at the end of each year, it’s a whopper of a bill due. Often, this is because you don’t have enough write-off when it’s time to file. In general, if you’re single, don’t have kids, and don’t own a home or a business, you have very few write-offs.
This means that unless you’re deducting more money from your paycheck to send to the IRS each payout, you’re likely paying hundreds or thousands of dollars to the government. This means it’s time to start thinking about ways to spend your money to make money rather than saving it all. In general, with the exception of an IRA and a few others, you don’t get to write off your savings.
But, if you start your own business, buy a house, or go back to school, you’ll basically be investing in yourself. You’ll also probably be enjoying your life more and spending your money — all while cutting back on your tax expenses.
You Have Money to Treat Yourself But Don’t. Ever.
You really want that new outfit, jewelry, car, watch you’ve been eyeing for the longest time. You have the money to buy it, more than enough. But you don’t get it. Why?
It might be because you are worried about overspending, running out of money or buying into “fast fashion.” Meanwhile, your money piles up in the bank or investments. You’re living way too far below your means, and it’s time to treat yourself.
Going back to the 50-30-20 rule from above, you should be able to spend 20% of your income on things you want. Otherwise, you’re living a life of toil and trouble with little enjoyment. The purpose of life, after all, is not to live to work but to work to live.
It’s Okay To Spend Your Money
There are always exceptions. Maybe you’re saving up for a house, wedding, want to retire a little earlier or are trying to build up an essential six-month emergency fund. Just be sure to check in with yourself, treat yourself and enjoy the money you work so hard for.
Many people came away from the pandemic with anxiety over finances — and for good reason. But if you don’t live your life now, enjoying the little pleasures that do cost money, you’ll likely regret it later.
You don’t have to spend your money on trifles. Travel, spend time with family or go see a play or a ballet. Experiences are often even more rewarding than the “things” we buy. They make memories that last forever.
Investing in yourself may cost some of that money you’re not spending but can.
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