How To Tell If You Are Living Beyond Your Means

Delinquent debt and significant financial burdens can contribute to an overwhelming sense of hopelessness and failure. In order to get out from under crushing financial pressures, many people opt to take advantage of the fresh start that can be provided by filing for bankruptcy. While bankruptcy can be a beneficial tool when it comes to restoring financial health, if you fail to change your spending habits then you will find yourself right back in debt in the future.

Here are three simple questions you can ask yourself to determine if you are living beyond your means, and some simple solutions to help you avoid financial trouble after filing for bankruptcy.

1. Am I paying for cash items with my credit card?

One of the easiest ways to determine if you are living beyond your means is to take a hard look at the purchases you are making with your credit card. If you are purchasing everyday items (commonly referred to as cash items) like groceries and gasoline with a credit card, you need to evaluate your spending habits.

Working with a personal finance specialist to create a budget that will allow you reserve your credit limit for emergencies will help you avoid falling into debt in the future.

2. Do I have a savings account?

Research shows that 21% of Americans have no savings account, and an additional 62% have less than $1,000 in their savings account. Learning how to set money aside in a savings account each month is important when it comes to living within your means. When you have a healthy savings account, you are able to absorb emergency costs without incurring the type of debt that could lead to financial problems.

If you find it difficult to save money on your own, try having a small portion of your paycheck automatically deposited into a savings account each month. If you never see the money, you will be more likely to keep it in your savings account where it belongs.

3. Am I paying off my credit card balance each month?

If you are using a credit card to help you establish a healthy credit rating after filing for bankruptcy, it's important that you only charge purchases that you have the cash on-hand to pay for. Carrying a balance on your credit card results in interest charges that could upset your budget.

Try reconciling your purchases at the end of each day, and transferring money from your primary checking account into an account dedicated specifically to paying off your credit cards. This ensures that you will have the cash available to pay your credit card balance in full each time your statement arrives.

Living within your means is an important skill to learn after you file for bankruptcy so that your negative spending habits don't tarnish the fresh financial start offered by a bankruptcy filing. Talk to a lawyer, like, for more help.