Paul Manafort couldn’t keep up his seven-figure lifestyle after his business dried up, his bookkeeper testified at his trial. (Aaron P. Bernstein/Bloomberg News)

Paul Manafort, President Trump’s former campaign chairman, is on trial for some pretty serious crimes, including tax evasion.

But his spendthrift lifestyle in addition to how he allegedly hid millions from the federal government has been on trial as well.

For me, Manafort’s spending brought up a question I get a lot: How do you know if you’re living above your means?

The formula isn’t as simple as you may think. Some might think they are doing okay if their bank account balances every month. In other words, your spending doesn’t outpace your earnings.

But to know whether you’re living above your means, you have to add a lot more to the equation. It’s more than subtracting your expenses from what you earn minus taxes, of course (assuming you aren’t squirreling away millions in offshore accounts and trying to cheat Uncle Sam).

You’re living above your means if you have more than enough income for the basics but you indulge in eating out, vacations, and overspending on clothes and cars at the expense of future needs such as having adequate retirement savings or being able to send your child to college without a boatload of debt.

And you can live above your means at just about any income level.

Prosecutors allege that Manafort lied about his earnings and falsified loan applications in an effort to continue living way beyond his means while making millions. He’s not an anomaly. A lot of folks are living too large.

Here’s how you know you’re living above your means.

You don’t have an emergency fund. A report from the Federal Reserve Board found that four in 10 adults, if faced with an unexpected expense of $400, couldn’t come up with the money unless they sold something or borrowed the money.

Manafort’s bookkeeper testified that he couldn’t keep up his seven-figure lifestyle after his business dried up. He hadn’t put any money aside, so the bills started to pile up, the bookkeeper said. But prosecutors allege that Manafort made $60 million between 2010 and 2014 while working for various interests in Ukraine.

Read: Paul Manafort: A case study in how you can still go broke while earning millions

I’m also not so sure Manafort’s former boss isn’t living too large as well. Read: Trump brags that he’s a billionaire, but he doesn’t act like one

You don’t have a “life happens” fund. The reason many people don’t have the money they need when an emergency happens is that they’ve been raiding their rainy-day account and treating it more like a slush fund.

You need an emergency fund for the big financial storms such as losing a job. But you will face unexpected gusts, such a major car repair, for which you need savings, too. To keep from tapping your emergency fund all the time, create a “life happens” account. Money will flow in and out of this fund as needed. So when you have a major repair, you tap this account rather than your emergency fund. When you recover from the smaller storm, you build the “life happens” fund back up.

For more on the difference between emergency and “life happens” funds, read: Unsure what money to save and what to invest? Here’s the answer.

Read: Should you build rainy-day savings or pay off debt?

You aren’t saving for retirement. Of course many people are struggling just to put food on the table or keep a roof over their heads. They can’t even begin to think about saving for retirement. But there are others who can.

If you took a nice vacation this summer or drive a luxury car and you aren’t saving enough for retirement, you are living above your means.

Read: Is $1 million enough to retire? Why this benchmark is both real and unrealistic.

— You aren’t saving for your child’s college education. Outstanding student loan debt is at $1.3 trillion. If you know college is costly, why aren’t you saving for your children?

They need a college fund more than a cellphone, a closet full of clothes or big birthday bashes every year.

Read: The best education your money can buy

And share this with close family and friends: The perfect baby gift? A small donation to a college fund.

— Your debt is keeping you up at night. I shouldn’t have to tell you, but I will. You can’t get ahead financially if you’re always servicing debt, especially for consumer goods.

No, using other people’s money isn’t a good thing. No, there isn’t a difference between “good debt” and “bad debt.” It’s just debt. And debt can limit your options and make it harder to weather life’s storms such as a job loss.

But many people are living the American Dream by borrowing too much, even for a home.

Monthly payments that seem affordable help you create the illusion that you aren’t living above your means.

Read: Yes, all debt is bad debt

Before you try to debate me about the merits of “good debt,” read this: Debt: Smack it or hug it? My debate with Michelle Singletary.

Also read these columns:

Should you build rainy-day savings or pay off debt?

Debt Dash: the best way to pay off your debt

Color of Money Question of the Week

What’s your definition of living above your means? Send your comments to Please include your name, city and state. In the subject line, put “Living Large.”

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Paul Manafort: A case study in how you can still go broke while earning millions?

Manafort is accused of not paying income taxes on the millions he made doing work for a pro-Russian political party in Ukraine. Prosecutors also allege that he avoided taxes by directing money into foreign shell corporations. He then paid for personal expenses by classifying earnings as loans.

Rick Gates, who worked for Manafort, has testified that he helped Manafort hide money. Gates also admitted to stealing and hiding income to inflate his lifestyle.

Last week, I asked: What’s your take on Manafort’s spending habits?

David Bennett of West Columbia, S.C., wrote, “The man appears to have an illness; perhaps it could be called a compulsive spending disorder.”

“Mr. Manafort chose to live this lifestyle as did his family,” wrote Chris Boyce from Milwaukee. “He chose not to live within his means when his income declined. He lied and cheated the government to keep more money. He could have sold homes, other assets and lived within his means. Others have. His character speaks for him and condemns him.”

“I find it amazing too that he could spend on such outrageous items,” wrote Angela, of New York. “But others go broke by giving. They give to family friends, churches, charity, etc. I think Manafort’s spending is worst but both seem to be related to not understanding that there’s only a finite amount of money.”

Jim Lochhead of Edmonton, Canada, wrote, “Manafort and Gates are, I suspect, but one example of many people who operate their finances in similar ways. Married to an accountant I have heard many stories of financially questionable decisions that hide personal expenses in business accounts.”

Read: Are rich people more likely to lie, cheat, steal? Science explains the world of Manafort and Gates.

Rick Talcott of Berkeley, Calif., wrote, “I guess you could blame lavish lifestyle or overspending, but from my perspective, Mr. Manafort’s uncomfortable position is quite similar to lottery winners and upper echelon professionals: a failure to invest for the future while the gusher of money was flowing.”

Earl Roethke of Minneapolis wrote, “The seemingly insatiable need to acquire new things speaks of an internal emptiness that someone is trying to fill with material goods. It doesn’t work, of course, but instead of drawing a sensible conclusion, I believe they think that it didn’t work because it wasn’t enough, and so they go back to the trough again.”

Larry Kalajainen of Brunswick, Maine, wrote, “At the beginning of our marriage 49 years ago, my wife and I decided to try to follow, as best we were able, the advice of the 18th century founder of the Methodist movement, John Wesley: ‘Earn all you can, save all you can, give all you can.’ He spelled it out in very practical terms. His formula: Save 10 percent. Give 10 percent. With occasional departures due to circumstances, we followed his advice. Now, after 44 years in parish ministry, without ever earning what society would regard as a large salary, we find ourselves comfortably retired with enough money to last the rest of our lives and (we hope) some to leave to our children and our favorite charities. And because of that early commitment, we have lived most of our lives free from anxiety about money. Money, as Jesus said, is a wonderful servant, but a terrible master.”

Color of Money columns this week

Knowledge isn’t power. The right knowledge is power.

Stay informed about your money.

In addition to this newsletter, please read and share my weekly personal finance columns.

One family’s approach to paying for college: GoFundMe

Why the future of America’s middle class is so financially fragile

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