CREDIT crunch

ARE YOU LIVING BEYOND YOUR MEANS?

You’ve got a late-model car, you go on overseas holidays and you eat out at restaurants at least once a week. Financially, you’re doing okay. Or are you?

These days, credit can be so easy to get that for many people, living beyond their means becomes a way of life. They may have all the signs of wealth, but not the bank balance to match.

You may have a lifestyle you really can’t afford if some of the following applies to you:

• Your credit card total is always close to its limit and you only pay off a small amount each month – you can’t remember the last time you actually paid it off in full. Credit cards can be great if you pay them off every month, but if you don’t, you start racking up the fees, so the things you buy with your card are costing you a lot more than you think.

• You’ve paid an overdraft fee. Once is a worry, but if this happens regularly, it should be ringing very loud alarm bells. It’s simple – if you are going into the red, you are spending more money than you have.

• You make a lot of purchases based on the principles of FOMO (fear of missing out) or YOLO (you only live once). You can start spending big money if you keep buying concert tickets or booking holidays because it seems that everyone you know is doing that.

• You find yourself saying things like, “I’m already in debt, a little more won’t hurt,” or, “I’ll get round to paying it off one day.” You could be digging yourself into a very deep hole.

• You don’t have any savings or else you keep dipping into what you do have saved as you don’t have enough funds to pay for day-to-day expenses.

• You have no idea what is in your bank accounts or how much you owe on your credit card. If you’re in this situation, chances are you could easily spend more than you have.

• You don’t know what your outgoings are. There are many people who don’t work out how much money they need to cover their weekly or monthly expenses. Some amounts are variable of course, such as how much you spend on groceries and power bills, but it is a good idea to come up with an estimated amount of what you fork out on everything from your mortgage and insurances, through to gym membership and Netflix subscription. Then look at how it compares to what you bring in every week/month. You could be in for a shock.

• You have to keep taking out loans or extending your credit limit yet you also keep upgrading your car or buying new furniture. If this sounds like you, it’s time to get your finances in order.

In a nutshell, you have to stop spending more than you earn and start paying off debts. There are several places you can go for budgeting help.

Your local Citizen’s Advice Bureau can help you to find a budgeting service and there is also lots of helpful advice on sorted.org.nz.