Whether you consider yourself to be financially responsible, or you always seem to come up short on cash, there are a few key indicators that may indicate you are living beyond your mean.And being aware of them can save you loads of money woes in times of a cash emergency.
Aside from a home, a car is one of the most expensive items you'll purchase in your life. While it's understandable to focus on monthly payment amounts when determining how much car you can buy, your ability to afford a monthly auto loan payment doesn't mean you can afford the car.
If you're in doubt, consider the duration of the loan: If it's longer than three years, and doesn't result in owning the vehicle outright at the conclusion of the loan, you're shopping out of your true budget.
The same premise holds true for auto loan refinancing: If you're refinancing because interest rates have dropped considerably since you initiated the loan, that may be a money-smart move.
If you are refinancing only to lower your monthly payments, and refinancing means that you are extending the life of the loan, you're not actually saving money -- you're just stretching out the payments.
If you've calculated the amount of home you can afford based only a 30-year fixed mortgage scenario, you may be taking on more than you can really afford.
Instead of strapping yourself to a 30-year fixed mortgage payment, consider how much more affordable less house with a shorter loan term is--despite the higher monthly payment.
By opting for a four per cent, 15-year fixed mortgage on a $250,000 home loan over a comparable 30-year fixed loan, a homeowner could save $97,020 in interest over the life of the loan. Further, he owns the home in less than two decades.
If money is so tight that you have to rely on overdraft protection in order to float your lifestyle, you're living beyond what you can afford. Period.
Exceeding your credit limit doesn't just cost you in over-limit fees.
Because your credit score is based largely on your debt-to-utilization ratio, which is the difference of the amount of available credit you have to what you've used, your credit score is lowered when your credit balances are high and it signals to lenders that you're in over your head.
If you are approved for new lines of credit--including a home mortgage--your future interest rates will be sky high.