by Maxwell Payne

Created on: September 03, 2009

Are you living beyond your financial means?

When it comes to answering this question there are people who like to complicate things. But there are a few simple ways to tell if you are living outside of your means.

Talking heads like Suze Orman and Dave Ramsey like to hawk their "products" to people and perhaps even prey on those struggling with excessive credit card debt. Instead of a straight answer you are bombarded with showboating (watch either of these 'experts' on a TV show). Some may call it showmanship but to each their own.

You can tell if you are living beyond your means by looking at the following parts of your life. You don't have to deprive yourself of things, cut up your credit cards, or buy some TV personality's book to figure it out.

You spend more than you actually have in the bank.

This is a basic concept of cash in vs. cash out. Credit cards can be an excellent tool for tracking spending and programs from Quicken to Mint.com make it very easy to track spending and see that all important number, the amount of cash you have on hand AFTER your expenses.

If month after month you are spending more than you have in the bank, you are living beyond your means. You don't need a credit card to be spending more than your weekly paycheck; writing checks and waiting for deposits or withdraws to clear can cause you to overspend or spend before the money is in the bank, triggering fees and further pushing you beyond your cash limits. Borrowing cash on a regular basis from friends, family, or payday loan businesses is also a red flag of living beyond your means. Of course overspending on a credit card can also be a signal.

You carry a balance on your credit card regularly.

This is another simple way to tell that you have a financial problem on hand. If month after month you can not afford to pay your credit card bill off in full by the due date than you may be living outside of your means. The whole cash in vs. cash out thing applies here as well.

The key is to treat the credit card expenses literally like debit card expenses. When you buy something with your credit card you must deduct that amount from your checkbook or use software that visualizes it for you. Act like the cash is no longer there because when you swipe the credit card that money has been spoken for. If you can not pay your credit card off in full month after month you must reduce spending.

There are exceptions to every rule and to every situation but the fact is clear; if you spend more money than you earn or have in the bank you are someone who is living beyond their means.

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