4 red flags that you are living beyond your means

Empty wallet Picture: Towfiqu barbhuiya/Unsplash

Empty wallet Picture: Towfiqu barbhuiya/Unsplash

Published Feb 2, 2023

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The most recent Momentum Unisa Household Financial Wellness Index has revealed that South Africans are living beyond their means.

According to the index, close to 70% of financially distressed households find it challenging to pay monthly expenses and pay bills. However, financially well households are also finding it difficult to cover their expenses.

The ability of South Africans to keep up with the rising cost of living was outpaced leading up to the end of 2022, which led to many people taking measures to live within their means as well as the restrictions of the current economic reality, according to Bertie Nel, head of financial planning and advice, Momentum.

Nel said: “Growing inflation and increased interest rates put us under pressure and make achieving our financial goals more difficult. However, it is even more important to keep your goals in mind during these difficult times.”

Here are four signs that you are living beyond your means:

Keeping up with their Joneses

If the buying choices of people are influenced (or even dictated by) their need and desire to fit in or outdo others, then they are definitely living beyond their means.

John Manyike, head of financial education, Old Mutual said: “We live in similar neighbourhoods, but they always have better houses, cars, furniture, lifestyles and their children go to better schools and we put ourselves under unnecessary financial pressure yet the reality is we can’t have it all.

“You should only make purchases and enter contracts that suit your pocket, not your social media profile.”

Your credit balances are increasing

According to Nel, only paying the minimum payments due on credit agreements and taking longer to pay off these agreements generally indicates a problem.

Nel advises people to only buy what they can afford and avoid credit altogether.

Nel said: “Don’t forget that rising interest rates are going to take a toll on your credit repayments, and you never know what may befall your own financial situation. You don’t want to be left with debt and no way to pay it off.”

You don’t have money left at the end of the month

A clear indication that you are living paycheque to paycheque is not having money left at the end of the month which is the first symptom of poor financial planning.

People should be constantly reviewing their budget plans and understand how the money that they are receiving is distributed to aid their financial plan.

Charnel Collins, CEO of National Debt Advisors (NDA) said people can stay on top of their finances by re-evaluating and re-calculating their expenses every 3-6 months or when there is a big lifestyle change that has an impact on a person’s finances.

You don’t set a budget

According to Nel, a budget is the backbone of your financial health and setting up a budget should always be a priority.

In their budgets people should divide their:

– high-priority expenses such as rent or bonds, life insurance, and debt, and

– low-priority expenses, like entertainment and subscriptions.

“A financial adviser can assist you with a financial plan that includes creating a budget. Consulting a financial adviser is free, so there’s no reason not to call one to assist you with a unique financial plan to help you on your journey to success,” Nel said.

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