Greetings, and welcome to the nineteenth edition of Wallet Wellness in 2024 - your midweek source of practical financial tips to elevate your money management skills!

We hope you had a chance to check out the last edition, where we explored the top 5 investing mistakes to avoid. In today’s edition, we venture into some of the telltale signs that indicate you may be spending more than you can afford.

As always, be sure to check out the Concept Corner below for a deep dive into the money concept of the week.

Let’s dive in!

MONEY254 TIP OF THE WEEK

5 Warning Signs That You Are Spending More Than You Can Afford 🚩

We would all like to live a lavish life, right? In a house within the neighbourhood of our choosing, adorned in the finest and latest fashion, enjoy the finer things without a second thought.

But let's get real - does your income truly support this dream lifestyle, or are your wants leading you into financial trouble; running out of money before the month ends, getting into debt, or not having much set aside for a rainy day?

Today, we explore signs that you may be spending more than you can afford and how to resolve that so that we can live more comfortably and achieve the financial freedom we desire.

Let's get to it!

1. Living Paycheck to Paycheck ⏳

This means that you use up all your income each month to cover your expenses, leaving you with little or no money. This could be a signal that you may be spending more than you can afford to be spending and you need to take action.

• Why it Matters: Financial Stress and Insecurity. When you have no savings or buffer, you're more vulnerable to unexpected expenses, such as medical bills or car repairs, which can lead to debt or financial hardship.

• What to Do: Create a budget to track your spending so you know where to cut back and allocate a portion of your income to savings.

2. Frequent Borrowing 🆘

This suggests that your expenses are consistently exceeding your income. This could lead to relying on loans or borrowing from friends, family, or mobile lending apps to manage your daily expenses or unexpected emergencies.

• Why it Matters:  It can lead to a cycle of debt that is challenging to break, accumulating high-interest debt or even damaging relationships. Read more.

• What to Do: Cut back on Spending: Re-examine your expenditure from the last few months and identify areas to cut immediately as you aim to start living within your means. Learn more.

3. Late or Missed Payments of Bills ⏰

This indicates that you may not have enough money to cover your expenses on time due to high expenses that exceed your income. It’s a sign you may need to downgrade your lifestyle for now.

• Why it Matters: Continuously missing payments can lead to a cycle of debt, penalties, or late fees as you struggle to catch up on past due amounts while managing current expenses. Read more.

• What to Do: Prioritise Bills: List your bills in order of importance and ensure that the most critical ones (like rent and utilities) are paid first. Learn more.

• Increase Income: Consider building additional sources of income including taking a part-time job or freelancing. Learn more.

4. Your Rent Exceeds 30% of Your Gross Income 📈

Rent is one of our largest expenses, right? Now, If your rent takes up more than 30% of your income, it means you might be struggling to cover other important expenses like food, school fees, transportation, and savings. 

• Why it Matters: Spending over 30% of your income on rent can make it hard to cover other essentials, save money, and avoid debt, leading to financial stress. 

• What to Do: Consider downsizing to a more affordable living space. Set a goal to lower your housing costs below 30% of gross income within a specified period e.g. 3-6 months. This could involve finding ways to increase your income.

5. Using Savings For Daily Expenses 🔄

If you find yourself regularly dipping into savings to cover daily living expenses, it suggests that your income may not be enough to cover your everyday costs. It could also mean you might be living beyond your means. 

• Why it Matters: Relying on savings for daily needs depletes your emergency funds and savings meant for longer-term goals. This delays financial growth. Read more.

• What to Do:  Create a Realistic Budget that prioritises essential expenses and identifies areas where you can cut back on non-essentials. Learn more.

As we reflect on these signs of overspending, let's remember that financial well-being is not just about the numbers; it's about peace of mind and the freedom to live the life we envision. 

Recognizing these signs and taking small but meaningful actions are crucial steps in our journey towards reclaiming control over our finances and paving the way for a brighter future.

Let's embrace this opportunity to make positive changes, not just for ourselves now but for our loved ones and our future selves. 

CONCEPT CORNER

Money Mastery: The Cash-Only Budget

Also known as the “Envelope Budgeting”, where you allocate money for different expense categories and store those funds separately, typically in envelopes or virtual categories, to visually track and control spending.

In this method, you should not use any cards or mobile money. It helps you stay aware of how much you’re spending. Learn more

Money and Me

What I Learned Trying to Sell My Dad’s “Maguta Maguta” Plot for 2 Years

“We thought we were about to hit the jackpot. Dad always bragged about its prime location, its massive potential for appreciation, and how it was a gold mine waiting to be tapped. Little did we know that selling land would be no walk in the park. 

“We listed the land for sale, expecting buyers to flock to us like bees to honey. Spoiler alert: they didn’t… Read on.

MONEY254 #MONEYTOK

The Envelope Budget Method

What budgeting method do you use? In today’s MoneyTok, explore the envelope budgeting method. Watch The Video and read more here on the 7 types of personal budgets and how to choose.

@money254hq

𝐖𝐡𝐚𝐭 𝐛𝐮𝐝𝐠𝐞𝐭𝐢𝐧𝐠 𝐦𝐞𝐭𝐡𝐨𝐝 𝐝𝐨 𝐲𝐨𝐮 𝐮𝐬𝐞? Well, it's end month and you may be curious to learn about how the envelope budgeting method works and h... See more

That's it for the nineteenth Wallet Wellness edition of 2024! We hope these financial tips have added some energy to your mid-week hustle. Stay tuned for more practical insights in our next edition of "Wallet Wellness" next week and watch out for Money Weekly on your inbox this Friday.

Also, don’t forget to download the Money254 App on the Google Play Store, and remember that we can help you compare over 300 loans, savings accounts, current accounts, and more if you’re thinking about your next product.

Cheers to your wallet's well-being!

Money254 editorial team.