Are you living beyond your means?

You got your degree, you landed a job, and now you have real income for the first time. Suddenly, you feel like you can afford a whole new lifestyle, but that’s when the trouble starts.

Living beyond your means is when you spend too much money for what you make. Coming right out of school and being lucky enough to get a job is exciting, and so is that regular paycheck, but chances are you’re not exactly rolling in the dough. Still, it’s easy to get caught up in the feeling of having money after working hourly wage jobs through high school and college, just to barely survive on the pennies you made.

Though you may be making money, it’s important to remember that living within your means is essential if you want to ensure a healthy financial future. Here are some signs you’re living beyond your means from Yahoo’s The Exchange finance blog, and ways to avoid them.

You couldn’t survive financially without the income from your job for six months

The worst happens. Your company is downsizing and you lose your job. No more paycheck. It could take you 3 to 6 months, or even longer, to find another job with a similar income. Could you survive that time without a paycheck? If you answered no, then you’re probably living beyond your means.

The key to surviving financially if you happen to lose your job is to save your money. Have you started an emergency fund? Consider setting up an automatic transfer from the account where your paycheck is deposited to a separate savings account. You can have the same amount transferred into your savings on a weekly, bi-weekly, monthly or other regular basis so you save money without having to think about it. In the event of unemployment, a major medical emergency or another unexpected expense, you’ll be prepared.

You save less than 10% of your pay

In addition to saving for a emergency fund, it’s important to begin saving for your retirement. By the time you’re 25, you should begin saving at least 10% of your paycheck.

Though there are many different opinions on the right percentage of your pay to tuck away in savings, saving 10% from age 25 to 70 will provide a modest, but comfortable, retirement based on a 4% withdrawal rate during retirement. Instead of opting for two nights out a week, have one instead, and save the extra money for retirement or an emergency fund.

You’ve carried the same credit card balance for over a year

Let’s hope you don’t have a credit card balance at all, but if you do, you should take care of it ASAP. Carrying the same balance for over a year without being able to pay it down is a sure sign you’re living beyond your means. If your balance grows from month to month, then you’re really in hot water.

Cut back your spending and don’t rely on credit cards for daily purchases. You will spend less using cash or a debit card.

You’ve overdrawn your checking account many times

The Free4ME account with many of Maine’s credit unions includes the Oops! Refund, which will forgive you for overdrawing your account (or other service charges) twice a year. We all make mistakes, and that’s what the Oops! Refund is for. If you find yourself overdrawing your account frequently, you’ve probably moved past the realm of mistakes and have started to live beyond your means.

Budget your money, setting aside the amount you need for bills and living expenses each month. Following a budget will prevent you from overdrawing your account.

Be money smart. Don't live beyond your means. For help with budgeting and other areas of personal finance, check out the super helpful Living Young & Free Field Guide.

Kylie K.