How to Determine if You Are Living Beyond Your Means (And What to Do If You Are)

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I know that for many of us, the beginning of the year is the time we start looking over our finances, try out a new budget, or just try and figure out what we are doing wrong and where our money is disappearing to each month.

I know that many people make new years resolutions but I don’t really feel like re-evaluating your budget is a resolution (unless you are resolving to spend less!). Instead, it’s a way to re-evaluate your situation, figure out your goals and where you want to be in X amount of years, and how you want to get there.

Many of us this year (due to job less, different jobs, rising costs in other areas) will realize we are living outside of our means. How do you figure that out and what are you supposed to do about it? Let’s start with the figuring out if you are living beyond your current income first, it’s fairly simple to determine.

First figure out the minimum you will bring in each month from all sources. This amount should only be your guaranteed income. Don’t add in commissions, bonus’, ect. Total this all up.

Then add up your bills. At the top of the list write all the bills that are the same amount each month and that you have to keep paying. (I know that phrase sounds odd but stick with me here!) Write all the rest of your bills on the second half of the bills list. (All the variable bills or things like electric, ect.)

Now make another list and write down all your debts in this list, even though they are included in your bills list. (Credit cards, loans, ect.) Make sure to list what you owe each month and the total you owe to be able to pay off the bill.

Total up the second column.

Now the first indicator that you are living beyond your means is if the second column equals more than the first. If that’s the case you have a problem.

But now even if your second column is less than your first column you still might have a problem. How much is the difference? Is it less than $100? Does it make you uncomfortable? If you answered yes to either of those you are also living beyond your means.

Now before your anxiety level goes up let’s get to the next part of our post…what we are going to do about it. Here is a list of tips that we have personally used when we needed to make a big change to our budget.

Start by looking at your variable bills, can you make them lower? Can you get rid of a cell phone or a tv service or lower your electric bill? Lowering these bills will help you gain a small mount of wiggle room in your budget.

Can you raise your income? If you really enjoy your job and you work hard can you ask for a raise? Can you pick up an odd job on the weekends? Can you start selling something from your home?

If you can’t lower any of your bills the easy way and if you can’t think of a way to bring in more income you may have to do something more drastic. It may not be pleasant but would you rather live the way you are now with the stress of finances hanging over you or would you rather be a little uncomfortable for a while until you make your situation better?

Some serious solutions to lowering your monthly costs could be:

  • Selling your house and renting, or living in another alternative method.
  • Look for a new job altogether. (That makes more of course, or that gives you enough time to get another part time job.)
  • Get rid of your cell phone altogether. If you really need one buy a pay as you go phone and limit when you use it.
  • Get crazy about growing your own food. If money is this tight grab the cheap seeds (the ones for like 4/$1 at the store!) and dig up some dirt from your backyard and get growing. This is guaranteed to save money any time of year if you are committed! (See my post on Container Gardening)
  • Don’t buy new things at all. Mend clothing to keep it functionable and if you absolutely need something only shop at a rummage sale or thrift store.

Now even if you do these serious things you still won’t be getting ahead unless you are using the extra money to pay off existing debt. Make a goal of when you want this debt paid off by and post your goal somewhere you can see it often. This will keep you motivated and working harder until you reach that better quality of life!

What’s next? Dive into various ways to save money on Little House Living!

Do you personally think it’s better living the same lifestyle you live now with no extra money or being a little uncomfortable and making changes for your future?

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  1. I’ve taken financial management courses at my church and have read lots of books over the years. It’s true–the best way to live comfortably is to spend less than you earn. Simple, but for most…NOT comfortable at first.
    When The Honey retired– I thought I was ready for it. We cut corners in all kinds of ways. I’m finding now–we’re able to do things still that will help make a difference and improve comfort level and allow for some ‘fun spending’ later. But right now…it’s all about the work to get there. Level headedness is key too!

    I am re-working the budget like you are saying…I’ll be honest the 2nd column is a bit scary!

    Enjoyed this post, thanks! Pat

  2. This was a much needed post for many in our society. I think that someone can make an easy 6-figure income and be “poor” while someone who makes $35,000/year can be “well off”. The determination is by lifestyle, financial goals, and …. MATERIALISM. This “keeping up with the Jones'” is really awful to our society. I just don’t understand it, but maybe that is because I really don’t care what others think of me, and I HATE shopping and don’t get “fashion” haha.

    I make my own food and grow what I can — for the health benefits — not to save money (that is a bonus for us!).

    We don’t live in a fancy house, drive cars that are 11 and 13 years old (And still running — we do our own maintenance mostly). We shop secondhand clothing stores. We do go out to eat, but not all the time. It is more of a treat when we do, even if we go to the local taco shop.

    I buy refurbished electronics (computers, etc).

    Other things I do to not waste money include paring down on cable channels, not upgrading to high definition (like many of my friends have), keeping the thermostat at 68 degrees in the winter vs. 72, and in the summer keeping the curtains closed during the heat of the day, opening windows during the cool nights to cool down the house and not rely on the A/C.

    I also have purchased LED bulbs for my home, very efficient and not toxic like the compact fluorescent. They cost more upfront, but are worth it I think! We also turn almost everything off and unplug small appliances when not in use, except for our computers…

    And we hang most of our clothing to dry in our laundry room. The only time I use the dryer is for sheets and towels and if I am in a rush. (so maybe one load in the dryer per week instead of 3). I make my own laundry soap, make my own shampoo, make my own lotion. (I do this to avoid toxins, and the money saving benefit is secondary, but awesome!).

    Good luck!

    1. Rebecca,
      I think we are two peas in a pod! We are like you. Buy used cars cash and hold onto them. Hang half our laundry, make homemade laundry detergents, mouthwash etc. Cook and bake from scratch cuz it just tastes better. Keep thermostat at 66 in winter and 72 in summer. We have chickens and beehives and a big garden and can our produce. It’s fun to find ways to be resourceful, it makes us feel like pioneers. There is still soo much i can learn but i am loving it, especially when it is going towards retirement, emergency funds, and extra towards the principal to the mortgage. :-). Super post, love this blog.

  3. You’re right. So many people assume that a cell phone goes in the “needs” column when just a few years ago it was a rarity. It’s time for a different mindset.

  4. This is a great reminder, and I love your money saving tips. I look forward to making more money this year than I did last, and hopefully, getting some container gardening going! I live in a townhouse with very little outside space, but I WILL make it work! Happy New Year! 🙂

  5. This is so important to so many people right now. My husband and i have been living in a basement apartment for almost 4 years now due to a job loss that dramatically changed our income. Sometimes i feel like we’ll never get out of here. This year however we decided to aim high and started a House Fund. By putting away around $31 a week, in around 10 years we will have $15,000 for a down payment on a house. It doesn’t sound like a lot but getting a start is better then nothing. And that is about the cost of eating out once per week for most people where we live. We will definitely be working harder to get our garden going this year too. Produce is getting more expensive and is beginning to take up more and more of our grocery budget.

  6. These are great tips. I took a foraging class to start foraging for mushrooms and other edibles around my city. Anything to save a buck right?

  7. Hi! Great post and right along the lines of how my family lives. My husband’s hours were cut back about a year ago, then bonuses cut, then a lay off. He was laid off for a moth and then went to work out of town and has to rent during the week so, although his pay is similar to his previous job, we have new expenses due to the rent/gas. Anyway, last March when I saw the financial changes coming I decided to take charge. I called all of our “variable” utilities like landline and cell phones to see what changes I could make to save money (and that would still serve our purposes as a family). We have3 cell lines, 2 of which were smart phones. We downgraded to regular cells on all 3 lines. We were offered a promo to keep our landline the same and save around $14/month on our bill-yay! I searched for ways to save on our water/sewer and electric bills. I put insulated curtains on our living room windows, we unplugged things that we don’t use often, I asked our family members to turn off TV’s , etc. when not in use-lights too, I started using my crock pot more and we grill more often to avoid heating up the oven often. I placed bottles filled with water in the backs of our toilet tanks (away from the guts) to save some water per flush (still allowing plenty of water for flushing). This alone saved around $14 the first month on our water bill! My husband built a water barrel station to collect rain water for watering plants and other outdoor uses. We pay water AND sewer on all of our water used so when we used the hose to water plants we were paying for sewage that we weren’t using–no thank you. lol I started using my clothesline whenever possible, and also installed a line in my laundry room and one stretching the length of our covered side deck. I have a folding laundry rack too for small amounts of clothes to dry. I started stepping down 1 cycle for washing most loads of clothes too in order to save on power use. For instance, if I usually use the “heavy” cycle, I stepped back to “regular”…”regular” got dialed back to “light”, etc. It saves on power and still washed great. I now only use longer cycles for heavily soiled loads, which don’t occur real often. I make my own laundry soap, fabric softener, “dryer sheets”, all purpose cleaner, “ajax”, foaming hand soap, and wipes of many types (baby-, glass-, bleach-, hand sanitizing-) and even came up with a nifty container for them using clean Folger’s coffee containers! I have recipes for many other items “just in case”…toothpaste, deodorant, etc. I coupon through a site that allows me to save money and earn points that I can cash in for money on several shopping/eatery accounts or gift cards. ( I save my points up for Christmas shopping. I hand make some gifts also. I repurpose everything I can think of. I buy in bulk when there is a good sale on something and stockpile staples for the kitchen and home. We are going to have a small garden this year (new to us). I canned tons of produce (froze a lot too) that our neighbor gave to us last summer. We buy meat in bulk from a meat market so we know how much and what type of meats we have to plan meals around. I started a compost pile last summer and will be reaping the benefits of that in a couple of weeks when I plant things. I add yard waste, kitchen veggie waste, newspaper, COFFEE GROUNDS and filters, egg shells, etc. to the pile and turn it once in a while. The list goes on and on…..I am so proud of all that we have done as a family to save money and really live better…a higher quality of life. Kudos to all who refuse to get caught up in keeping up with the Jonses and want to live a purposeful and rewarding life!

  8. Right now, I am sharing a Trac-fone with my son. It works for now.
    I will probably buy one after he stops being a full-time student. I cook
    almost everything from scratch. Tacos, soup, salads, smoothies are quick and healthy. I am educating the whole family on cooking, dishes, laundry and making frugal choices. Sometimes it is hard to be (on guard) all the time, when you are being careful with money.
    Home-depot was recently offering free “designer advice” for persons looking to update their kitchens (especially if they wanted new cabinets). I realized that any “designer” linked with Home Depot is going to look out for Home Depot interests, not mine. This can be tempting when your kitchen floor is completely ripped up. I am deciding to paint my kitchen cabinets. We are only replacing ceiling lights and flooring. We probably won’t replace our appliances until they wear out. Also, avoid like the plague (financing with Home Depot or
    any store).