Financial stability is something a lot of people strive to attain. From dealing with high-interest debt to struggling to save money, achieving some semblance of peace can be daunting. Thankfully, it’s not impossible.
Here are signs you’re financially stable that can help give you a jumping-off point to reaching more advanced financial goals.
You Have a Low Debt-to-Income Ratio
Debt is a necessary part of life for many people. However, you don’t want your monthly debt payments to eat up too much of your income.
For example, you can get a mortgage with a debt-to-income (DTI) ratio of 43 percent. That’s not to say that is a healthy level. By cutting that ratio in half or more, you free up cash to apply to other needs each month.
You Have No Problem Treating Yourself
Splurging on yourself is something we all like to do. If you can do this without guilt, it shows you can do it and that your budget will be fine.
Even if it’s not at the interval you prefer, planning out splurges and doing it regret-free reveals a level of financial security.
You Can Invest Each Month
Setting aside money for your retirement planning can seem burdensome if you’re struggling financially. That’s not the case if you’re financially stable.
If you have access to a 401(k) plan, that is likely your best choice. Don’t overlook ways to invest with little money, either. Many brokerages let you start investing with minimal funds, and the extra time you give your cash to grow, the better.
You Can Handle an Emergency
Life is messy, and you never know when an emergency will happen. One of the top signs of financial comfortability is an emergency fund. It’s best to have three to six months’ worth of living expenses in this account.
If you’re not there, make it a goal to reach one month of living expenses, then two. Using an online bank like CIT Bank is best, as it pays a competitive interest rate to help your cash grow.
You Pay Off Your Credit Cards Monthly
Credit card debt is a terrific way to derail your financial goals. Paying them off in full each month is a sure sign of financial stability.
You Don’t Fight With Your Partner
Differences over money are one of the leading causes of divorce in America. Financial issues can wreak serious issues between a couple.
You don’t always have to agree with how to manage your money, but being on the same financial page is a sign of financial security. Ultimately, it helps you strive towards common goals.
You Can Take Advantage of Credit Card Rewards
Credit cards are a useful tool to manage your finances when treated wisely. Rewards credit cards are even better as they allow you to earn points and rewards for your normal spending.
These can be used to fund vacations, or you can earn cash back. Just remember to pay them off in full monthly since no reward is worth going into debt.
Your Not Underwater On Your Car
A financially stable person sees a car as a tool to get you from point A to point B. They also realize that cars are a depreciating asset.
Financial security results in having a modest car payment, or none at all, and not overextending yourself just to get into a car. That new car smell is fun, but it’s not worth the $700+ average monthly car payment in the United States.
You Live Below Your Means
Spending less than you earn is a sure way to get ahead with your finances. A financially stable person aims to spend less than they make and save money.
This opens up opportunities to save for the future, build passive income streams, and apply funds to other goals. Bonus points if you save raises instead of using them to justify wasteful spending.
You Track Your Expenses
Budgeting is a bad word for many people. It’s not required for financial stability, but it is necessary to know where your money goes each month.
Personal finance is personal for a reason. There are many tools to track your spending. Select one that works for you and use it to help you identify areas where you may need to cut back.
A Job Loss Isn’t the End Of the World
No one wants to lose their job. It can be stressful and traumatic. A financially secure person has an emergency fund and other savings to rely on to stay afloat.
They also take the time to find the right job to step back into and actively look for ways to invest in themselves to help make them more attractive to employers.
You Automate Your Savings
Automating your savings is one of the most beloved tools of a financially secure person. They know they’re busy, but they don’t want to forget to save money with each paycheck.
Many employers let you do this every pay period. If they don’t, most banks let you do it for free.
Your Credit Score Doesn’t Scare You
Credit scores aren’t perfect, but it’s what we have. A financially stable person has a good credit score. This is the result of avoiding high-interest debt and making on-time payments.
They do this because they know having one gives them access to the best interest rates possible if they need a loan.
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