Well, you made it through the holidays again and everyone is thrilled with the gifts they received. The problem is that now the credit card bill is about to arrive and your anxiety is rising. It is the beginning of the year and it might be a good time to reevaluate your spending habits and make a change. There are ways you can tell if you are spending too much; not just during the holidays, but, anytime of the year.
This isn’t just you, the average American lives with credit card debt ranging from $5,000 to $7,700. This means that people are spending more than they have and that means they are definitely spending too much. All of the high debt averages in America are not just credit cards, there are mortgages, student loans, car payments, cell phones, and just about anything else you can get with credit.
There are ways you can tell if you are spending too much and if you fall into any of these situations you made need to change your habits.
Your Credit Situation
How much credit are you living on let’s look at a few things that provide ways you can tell you are spending too much.
- You Have Credit Card Debt. What this means is that if you are not able to pay your credit cards in full at the end of the month you are spending too much. You would not be alone; nearly thirty-four percent of households in America have credit card debt.
- Paying Too Much For Your House. You should not be spending more than 28% of the household income on a house payment or rent.
- Paying Too Much For Your Car. Cars drop in value rather quickly so sinking a lot of money into it is not a wise decision. A conservative person above the age of twenty should try to keep a car payment around 15% of their income level. If you are driving a car with a payment higher than your house payment these are ways you can tell you are spending too much.
Let’s Talk About Savings
You do not have to save every penny you have ever earned, but, it is good to have a little stashed away. Following are some tips about savings that can give you ways to tell if you are spending too much.
- You Have Nothing Reserved For Retirement. It is sad, but, nearly one-third of Americans do not have anything set aside for retirement which could leave them working long past retirement age.
- You Have Too Little Put Aside For Retirement. Most financial representatives will tell you that from the age of twenty on you should be putting away ten to fifteen percent of each paycheck to be settled for retirement. It is hard and if you are not doing it you may be spending too much.
- You Are Not Following The Financial 50/20/30 Rule. This is a rule that was developed to help people better control their financial situation. This means that fifty percent of income should be for life’s essentials, twenty percent should be going towards debt, savings, and retirement, and thirty percent should applied to life choices like how many cable channels you want to pay for and how fast your internet should be. If you are unable to follow this; these are ways you can tell you are spending too much.
Lack of Future Planning
There are things in life that we can plan for because we know they are going to happen, but, there are things that hit us unexpectedly and we need to be prepared for those as well. Let’s look at these ways to tell you are spending too much.
- There Is No College Fund For Your Children. The sad truth is that the amount of student loan debt is climbing and you should try to avoid putting your child in that predicament. The average student will graduate college owing roughly $33,000. Set money aside to help your child not have to start their new career in debt.
- There Is No Family Emergency Fund. There are things that are going to happen that you may need to pay for right away and without an emergency fund you cannot. The recommendation is that there is three to twelve months of income set aside. If you don’t have it now; just get started.
- You Forego Insurance. Yes, insurance can be expensive, but, it is nothing compared to what you may have to pay in the event that something major happens and lands you in the hospital. Think about it this way if you have a heart attack an spend five days in the hospital it could cost you more than $50,000 or you could pay for insurance and pay just a fraction of that.
The previous subjects are very important and you should think about them very seriously and get your finances in control. All of these statements are ways that you can tell you are spending too much.