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From May 16th, 2016

By  Christine Giordano


You know that icky feeling. Your friends are all about to do something fun, like head to Las Vegas, and you can’t quite afford it. Or maybe it’s your turn to be generous and grab the check, but you know you’ve been spending way too much.

Perhaps you’re eyeing an expensive watch that could make your business handshake seem all the more accomplished. You don’t want to miss an opportunity by being thrifty, so, you take a deep breath, clench your teeth and reach for your credit card.

Actually, you’re not alone. According to a recent study, 30 percent of men and 24 percent of women in America are willing to go into debt by at least $1,000 to depict an indulgent lifestyle, and one in 10 Americans making $80,000 or more is willing to take on $5,000 in debt to portray a luxurious lifestyle, according to the survey by mobile banking app, Fintonic.

It may not seem like a lot – but when you pair it with the recent GoBankingRates survey that found 1 in 3 Americans have no money saved for retirement, or a Federal Reserve Board survey that found 47 percent of respondents would need to borrow or sell something to cover an unexpected $400 bill, it suggests a pattern.

Is your lifestyle hurting your chances for retirement?

“You can’t just spend everything you make and hope your retirement will take care of itself,” says Tom Mingone, managing partner of Capital Management Group in New York. “If you’re going to spend it, the best thing is to make sure you’ve already allocated some of it to savings.”

You have intrusive thoughts. A sign your overspending is out of control is when your thoughts and fears start to invade your feelings of well-being. You’ll worry about losing your house, your lifestyle or your partner, says clinical psychologist Bill DiScipio in Sag Harbor, New York. “High end living can parallel addiction,” he says.

The fix: unravel the malady to gain control and take it one step at a time, DiScipio says. “Re-evaluate how you got there,” and what you really desired, then make changes, he says. Think about whom you’re trying to impress. Is it compromising your life and those close to you? Shift your thinking to who is important to you, DiScipio says.

You can’t meet expenses. Rent is due, creditors are calling, and you’re seriously considering living on Ramen noodles. The solution may require a second job, having more nights in with friends, or downsizing your dwelling.

“Too many people confuse needs and wants,” says P. Jeffrey Christakos, financial planner at Westfield Wealth Management in Westfield, New Jersey. “Your living space should meet your minimum requirements, but not more than needed. You test other areas of your life with the same measuring tool.” This includes dining out versus eating in, Netflix (ticker: NFLX) versus a movie theater and seeing friends at home versus the local pub. Downsizing your residence could also save money on utilities.

You’re not paying off your credit cards: Debt and 20-plus percent interest puts you at an extreme disadvantage, especially when it accrues. And it’s just so easy to buy that new toy or meet for drinks when you don’t need to worry about paying off the bill.

If you skip your payment, penalty APRs are 52 percent higher than regular APRs. “Credit is like monopoly money,” Mingone says. “It’s too easy to swipe it.”

One client came to him 20 years ago with $15,000 in credit card debt. “I told him to cut up his cards and figure out how much he could possibly pay toward his card debt each month and come back to start a savings plan.” Now in his 40s, the client is now a wealthy man.

You have no money left over each month. We all know it’s much more fun to spend money than save it, but there will come a time when we’ll need that money for a rainy day, health emergency or heating bill in our old age. “The best thing is to have savings automatically deducted,” Mingone says.

Take control by separating your monthly expenses into envelopes with the necessary dollar amounts indicated, says David Greenfield, financial advisor with D.A. Davidson & Co. in Seattle. Cash your paycheck and allocate it into the corresponding envelopes. If you pay your expenses electronically, this can also be done by separating your checking account into buckets, or categories for each item.

The trick is self control. “If you allot $250 to entertainment each month, once the $250 is spent, then you have to wait until the next month to spend more entertainment dollars,” Greenfield says.

You haven’t maxed out your 401(k) match. “Lifestyle downgrades are harder than upgrades,” Christakos says. If you haven’t maxed out your 401(k) match, you’re leaving serious money on the table and ripping off your older self.

Consider your entire budget, including at least 10 percent for savings each month and only if there is surplus should you consider upgrading your possessions, such as getting a nicer car.

You have no clue what it will take to retire. It’s just a little overwhelming to you, so you haven’t though about what inflation will be when you retire, how long you want to work, and haven’t explored a retirement calculator or thought about hidden health care expenses that might have you skipping lunch when you’re 80 in order to afford your heart pills.

“Don’t wait,” says Thomas Walsh, certified financial planner and portfolio manager with Palisades Hudson Financial Group’s Atlanta office. “No matter your age, decisions you make now will cause a ripple effect on your long-term financial plan. Initiate the financial planning process by setting specific, actionable financial goals.”

Don’t be afraid of the stock market if time is on your side, Walsh says. And if you hold mortgage debt at record low interest rates, it may make more sense to invest the extra cash then to pay it down ahead of schedule.

“Order your outstanding debts from the highest interest rate to the lowest,” he says. “If there is reasonable expectation that your investment return will exceed your outstanding debt’s interest payments, then your money is better off invested.”

You spent your tax return ahead of time. Tax rebates can be forced savings, and if you haven’t boosted your portfolio savings in years but have already spent your tax return, it’s time for change.

Don’t hide your head in the sand, hoping things will turn around on their own,” says Nina Heck, director of counseling and client services at Guidewell Financial in Baltimore. “Make changes that will help insure you have the resources you need when you retire. If you haven’t lived on a budget before, now is the time to set one up.”

The more you spend now, the more you’ll need in retirement to maintain the lifestyle, Mingone says. “And it becomes the beast that you can’t feed enough. But those who save and live a modest lifestyle have an easier time during retirement.”