Oversaving Could Be Costing You: 3 Signs You Can Spend More
We often hear that we should not be living beyond our means or order to maintain a good credit score, not live paycheck to paycheck and be able to save. But what if you're living too far below your means?
Making money and not enjoying it can also be a problem, and is often a stress response to having a difficult financial time in the past. If you're reading this, here's your sign to let go a little and appreciate the fruits of your labor.
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1. Your Largest Expense Is Savings
When you look at your budget, if the bulk of what you "spend" your money on is investments or savings, you're living too far below your means. This means you could be using that money to enjoy life. It's a good idea to save, of course, but the rule of thumb is to save 20% of every paycheck.
This budgeting guideline, referred to as the 50/30/20 rule, argues you should spend 50% of your income on what you need (rent or mortgage, utilities, food, insurance, etc.), 30% on what you want (vacations, luxury items, etc.) and 20% on savings and investments. It's one thing if your split is a little different from this one.
However, if 50% or more of your income gets put away for later, you could likely afford to enjoy your life a little more.
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2. You're Paying Too Much in Taxes at the End of Each Year
For many people, when your tax bill comes at the end of each year, it's a whopper of a bill due. Often, this is because you don't have enough write-off when it's time to file. In general, if you're single, don't have kids and don't own a home or business, you have very few write-offs.
This means unless you're deducting more money from your paycheck to send to the IRS each payout, you're likely paying hundreds or thousands of dollars to the government. This means it's time to start thinking about ways to spend your money to make money rather than saving it all. In general, with the exception of an IRA and a few others, you don't get to write off your savings.
However, if you start your own business, buy a house or go back to school, you'll basically be investing in yourself. You'll also probably be enjoying your life more and spending your money -- all while cutting back on your tax expenses.
3. You Have Money To Treat Yourself but Don't. Ever.
You really want that new outfit, jewelry, car or watch you've been eyeing for the longest time. Heck, you even have the money to buy it with plenty to spare. But you don't get it. Why?
It might be because you are worried about overspending, running out of money or buying into "fast fashion." Meanwhile, your money piles up in the bank or investments. You're living way too far below your means, and it's time to treat yourself.
Going back to the 50/30/20 rule, you should be able to spend 20% of your income on things you want. Otherwise, you're living a life of toil and trouble with little enjoyment.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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