A lot of people believe that you need to be an expert to master your finances. That’s simply not the truth. All you need is a willingness to do the work and a commitment to achieving your financial goals to become financially stable, or even independent. There are some basic things you must follow to reach that stability. These are 13 indications that you’re financially stable and on the path to reaching more advanced goals.
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You Can Sleep at Night
Perhaps one of the top signs that you’re financially stable is that you can sleep at night. It’s not just any kind of sleep though.
It’s a peaceful one because you know there’s generally nothing to worry about. You know you can pay your bills and you can handle most emergencies that come your way.
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.
Your Net Worth Goes Up Each Year
To become financially independent, your net worth needs to increase every year. Sure, some years may be better than not, but a financially stable person seeks to increase their net worth annually.
Some factors are out of your control, such as what the stock market does, but many other things are within your control. Harness those to protect yourself.
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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I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.