You may not know it, but you may have already started live beyond your means. You always have that notion that you are earning something that should be able to pay for the bills, buy food and purchase the things that you want. But you may already be living beyond your means and you are paving yourself a way towards bankruptcy.

If you do not take care of this situation as soon as possible, you might find yourself in a situation where you cannot get out of debt and bankruptcy is the only way.

If you are really not sure of overspending, here are indications that could tell you that you not spending your money wisely.

1. You spend less than 5% of your salary on savings – Spending all your salary every month is a sign that you are living beyond your means. It could even be possible that you are spending part of your savings. Your 5% allocation for savings really means nothing because they will be spent in the future anyway. Check your budget and calculate how much you spare for your savings account. If you realize it is less than 5%, better cut costs on different things.

2. A rising credit card bill – Credit cards may be the number one reason why you are over spending. Credit cards give you a false impression that you still have something to spend. You max out your credit card but you are unable to pay them because your salary is not enough to pay them. You may be able to pay the required monthly fee but you are still increasing your debt. Try letting go of your credit card for at least a week and see the difference on how you spend.

3. Spending more than 25% of income to debts – You may have a great salary but if you spend 25% of that salary in your outstanding debts, you are in big trouble. Spending more than 25% of your salary on debt means you are either cutting costs in other things or just spend more money. Unfortunately, the latter always happens. Again, take a look at your budget and know how much you spend in paying your debt.

4. Below 600 credit score – If your FICO credit score is below 600, then you may be in trouble. Although a credit score of 600 still looks good, anything below that can already be a considered a bad credit line. There are companies today who place the threshold for a “good” credit score at 625. Your credit score reflects your spending behavior with the use of credit card and other types of loans. More loans will mean a lower credit score. If you end up with a bad credit score, you may be spending more than you should and resort to loans just to have what you want.

5. Bills – Following are the essential bills that you should receive monthly:

• Electricity • Gas • Water • Phone

A clear indication that you are spending more than you should, is on the number of bills that you have to pay every month. You may add internet in the list for research and other personal use,  but a monthly bill for a 500-channel cable TV, a magazine subscription and mobile phone bill for internet use may not really be necessary. These bills will take more than 50% of your salary which may force you to use credit cards to buy other things.

Avoid overspending. It is not just for your convenience today but also in the future. Overspending may lead you to bankruptcy which will be very hard to overcome.