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Living within your means, otherwise known as not spending more than you earn, is one of the (if not THE) top tenets of personal finance. Even so, with the dismal economy of the past 5 years, many are still struggling to maintain a realistic spending pattern.

Based on data compiled by Consumer Reports and released as their Consumer Reports Index, financial troubles are increasing among the middle class in America. The Consumer Reports Trouble Tracker, which measures financial difficulties, rose from 32.7 in January to 37.5 in February. Hardest hit were those in the northeast and west, while those in the southern states actually saw improvement. The top problem areas mentioned were missed bill payments (non-mortgage) and the inability to pay for medications and medical bills.

From a more positive perspective, the Trouble Tracker is actually down substantially on a year over year basis. The February 2012 reading for the Trouble Tracker was 49.1 and in 2011 it was at 58.7, indicating that conditions are improving. The same problem areas were highlighted in the previous two years Trouble Tracker.

While it’s nice to know that American troubles are receding, a more important personal question is whether you and your family are living within your means. Are you saving for the future, or are you spending more than you earn? Of course if you can’t pay your bills you are obviously in trouble, but there are other signs that could be pointing to financial troubles on the horizon. Here are 8 signs that indicate you are living beyond your means:

1. You open new credit cards to help pay off existing balances. This is one of the top signs you are spending more than you earn. Moving a high interest balance to a lower interest card CAN be a good move, if you close the original account after paying it off AND you pay off the new card before the interest rate rises. If you are opening new credit cards simply to increase your credit limit though, you are heading for financial ruin. Trust me, I lived through the cycle and built up over $40,000 in debt before finally coming to grips with my credit card addiction.
2. You either question a purchase or regret it later. Those who are financially secure rarely question themselves when making a purchase. Internal debates with yourself such as “I know I shouldn’t…”, “I really deserve this because…”, and “I’ll figure out where to get the money later…” are sure signs that you are living beyond your means. Give up your addiction to things and your sense of entitlement if you want to enjoy the peace of mind that comes with financial freedom.
3. If you (or your spouse) lost your job(s) you couldn’t make it financially for a minimum of six months. This indicates that you aren’t following the almost universal personal finance advice to create and maintain an emergency account that would cover 6-12 months worth of expenses. No matter what you want to call it, you need to create this account and keep working at funding it until you have a minimum of 6 months expenses saved in case of emergencies such as medical expenses or job loss.

   I don’t expect you’ll find this aspect of your finances very glamorous, but in all honesty very few of the nuts and bolts of personal finance are. Budgeting, bill payment systems, paying off debt and funding an emergency account…all these are boring, but necessary cornerstones of personal finance.

   The amount you need to put aside will depend on how long you expect it would take you to replace your income if you lost your job tomorrow. Those who would have a difficult time finding a comparable position, those with volatile incomes, and those who are self employed should strive to save more. Personally I use 3 months as my emergency fund, though I know it should probably be more.

4. You take advantage of special 0% interest deals in the expectation that even though you can’t afford the item now you will be able to afford it next year. No interest for 12, 24, or 36 months on electronics, household appliances and furniture are common lures that you need to avoid. If you do in fact have the cash now simply pay for the item. If not, don’t take the chance that you may not pay off the debt on time. If you fail to pay off the item in the allotted time you will get hit will excessive interest charges and possibly even penalties. If you are unable to afford the item now, there’s a good chance you can’t afford it in 12 months either.
5. You carry a credit card balance that hasn’t declined in the past 12 months. The inability to pay off revolving debt is a good indication that you’re spending beyond your means. If your credit card balances are increasing you are even deeper trouble. Honestly, your goal should be to pay off ALL credit card debt and remain credit card debt free. There are few debts more expensive than credit card debt and in general credit cards are never used to finance a growing asset. Instead they are used for vacations, impulse purchases and other lifestyle enhancing items. Drop the plastic and pay cash instead.
6. You pay overdraft fees on your checking account. Overdraft fees are imposed by banks when the balance in your account is insufficient to cover a check or debit card purchase. One overdraft fee as a mistake can be overlooked, but if overdraft fees are a regular thing for you (occurring every few months), you are living beyond your means and something is going to crash and burn soon. Besides not having the money to cover the charge, your bank will also hit you with a charge, typically $35-50, compounding your financial difficulties.
7. You not saving 15% (or more) of your income each month.It’s difficult to determine the ideal savings amount, but 15% is a good starting point. This is for young people though. If you are over 40 you are nearing your highest income and should be saving more.

   If you are currently 25 years old, you would need to save 15% of your salary in order to retire at 65 with 80% of your pre-retirement income. That assumes a 4% withdrawal rate after retirement and also assumes that inflation won’t spike abnormally high, but will remain within historical averages.

8. You are paying more than 30% of your take home salary in mortgage payments. Recommendations from financial planners range from 25-40% of your take home pay for household expenses (mortgage/rent, upkeep, taxes), but I prefer to err of the side of caution and limit the mortgage/rent expense to 30%. Any more than that and you are in danger of putting yourself in a real bind if some other emergency expense arises.

While I think these are some of the top indications that you are spending more than you earn and living beyond your means, I know that the list isn’t comprehensive. What other signs can you think of that indicates you are spending more than you should?