7 Signs You’re Spending More Money Than You Should
For those who want to live a financially stable life without having to choose an account to leave open at the end of the month, it is essential to pay attention to spending.
It is obvious that, in some situations, it is not easy to reallocate your expenses. But it’s never too late to take a first step and start to reorganize financially.
And it’s important to point out that a budget gap rarely happens overnight, but it’s a result of several bad decisions about how to manage your income.
Based on a Business Insider list, InfoMoney has picked out seven signs that could show that your financial life isn’t stabilized the way it should. These are some negative indicators that show why your finances are in such a mess. Check out:
- Budget based on gross payment
Even that person who earns a great salary can end up falling into this false sense of financial well-being. This sign is for those who plan their spending just by looking at their gross payout.
Planning your expenses using only the amount of your fees is a mistake, as there are several variables that can reduce this total and make that month’s expenses exceed the available money.
It is important that the worker knows, for example, how to account for essential expenses for his family and deduct taxes in order to effectively calculate how much he will have available to spend that month.
- Expenses exceed income
It seems like a rather obvious mantra: don’t spend what you don’t have. But many families have difficulties in having more money coming in than going out.
When listing all expenses – from essential to superfluous – this sum should never exceed the monthly income. If that happens, the end result will always be one: debt.
This tip is essential for self-employed workers and freelancers, as it is difficult for these professions to manage cash flow due to the variation in income between months.
The ideal for these professions is to find the income base line – which can be done through an average of the collected during the last 12 months. If the worker wants to feel more secure, it is recommended to set a spending ceiling a little less than the income of the worst month in the last year.
- Negative equity
Getting into debt is the clearest sign that money is going out in greater amounts than it is coming in.
If this behavior lasts for a period of time, it is likely to cause negative equity – which is simply owing more than you have. And this is more common than it should be among Brazilian families.
According to data released by the National Confederation of Store Leaders (CNDL) and by the Credit Protection Service (SPC Brasil), around 6 million Brazilians started the year in debt, with a compromised CPF.
- Pay the minimum credit card and get revolving credit
Using a credit card for all or most of your purchases is perfectly fine, as long as you can pay the balance in full each month. If you fail to pay the bill, or simply make the minimum payment, the remaining balance will start accumulating interest and growing exponentially. This is called revolving credit.
This is a type of credit offered to the consumer when he or she does not pay the bill in full. The difference between the total amount and what was actually paid becomes a loan.
According to data from the Central Bank (BC) the average interest on the revolving credit card was 318.3% per year in December 2019.
Ideally, you should always try to pay the bill in full so that next month’s earnings aren’t consumed by interest.
- Housing expenses exceed 30% of income after tax
So that the family budget is not too compromised, the ideal is to set aside, at most, 30% of the income to pay for housing costs, whether rent, financing or mortgage.
A person who earns R$5,000 a month must set aside R$1,250 to pay housing expenses. If this limit is exceeded and it starts to complicate the rest of your budget, it could be a sign that funding this type of house or apartment is, in general, a wrong decision.
- Purchase to impress or keep up with friends
There are many cases of people who buy a certain product that they clearly don’t need, and they do it just to accompany that wealthy friend, or even to impress their coworker with a brand new car.
In these cases, these purchases are purely motivated by the desire to impress and not the need itself. It is important that each person knows the scenario of their real financial situation in order not to assume some debt that will be difficult to pay just because friends can.
- There’s nothing left to save
No matter the amount of your income, saving a part, even small amounts, should always be part of your salary plan.
However, there are people who are convinced that there is no way to save because they are not earning enough money or that spending is likely eating away at everything.