Managing your income and expenses in a sensible and consistent way will give you security in your finances. With this security comes a sense of relief, as you know you’ve set yourself up to succeed with money. These 19 signs show that you’re earning and spending your money in a positive way.
You’ve Got an Emergency Fund
According to Bankrate, “As of May 2023, more than 1 in 5 Americans have no emergency savings.” For financial security, it’s a good idea to have three to six months of living expenses in case you were to lose your income or face a large, unexpected cost.
You’re Debt-Free or Actively Reducing Your Debt
The average American has a variety of loans, including credit cards, student loans, and car loans. If you are debt free you won’t owe any money, freeing up your income for savings and investments. Even if you do have debt, paying it off will help you improve your financial security.
You Have a Healthy Credit Score
A healthy credit score will make you more attractive to lenders and banks. This allows you to get better terms for loans or credit, often meaning you pay less interest on debt. To maintain a good credit score, you need to ensure you pay your bills on time, keep a good proportion of your available credit unused, and regularly check your score.
You Have Comprehensive Health Insurance
Having a good level of health insurance coverage means you’re protected for a wide range of medical needs, and it reduces your risk of being landed with a large out-of-pocket bill. Your insurance should protect you for preventative care, major expenses, and mental health services.
You Invest Regularly
Regularly investing in a variety of accounts and funds can help you grow your wealth substantially and give you stability for your future. Axios says that “in 2022, about 58% of American households owned stock, either directly or indirectly through mutual funds and other investment accounts.”
You Own Real Estate
Owning a home will allow you to build your equity over time as you pay off your mortgage. It’s also a great way to invest money, as you’ll often find the value of the property will increase over time, or you’ll gain an income stream through rental charges.
Your Retirement Savings Are On Track
People often aim to save around 15% of their annual income for retirement. Starting this saving early and making consistent payments into pensions or investment accounts will mean you benefit from compound interest, and you’ll be even more secure in your later years.
You Have No Financial Worries About Basic Necessities
In a 2023 report, Ramsey Solutions found that “just over half of Americans (51%) said they were having difficulty paying their bills in the past three months, and 42% said the same thing about paying for food.” Putting together a monthly budget that allows extra money for these expenses can help avoid crises.
You Can Handle a Major Financial Setback
Having savings, an appropriate level of insurance, and an emergency fund will put you in a great position to cover any unexpected expenses that come your way. Many people aren’t in this position, and unfortunately, skimping on insurance coverage to save money in the short term can leave you at risk of a much higher cost in the long term.
You Can Afford Regular Vacations
Being able to put aside money or spend it on vacations and other leisure experiences without it impacting your day to day budgeting is not something that everyone is able to do. It can be helpful to save into an easy access account each month so that travel and other luxuries become easier to pay for throughout the year.
You Have Diverse Income Streams
Multiple sources of monthly income give you significantly more financial security, as you don’t have to rely on a single employer. Passive sources of income can be a great way to build your wealth; these include real estate rentals, dividend-paying stocks, or online business opportunities.
You Regularly Contribute to Charity
People who can make regular donations to worthwhile causes are able to live beyond the paycheck to paycheck way that many others have to. If you have significant wealth, allocating a monthly donation budget can be a great way to help others less fortunate than you, plus you’ll often benefit from tax relief.
You Can Afford Professional Financial Advice
Hiring a financial advisor can help you make the most of your money, including making the right investments, planning your taxes, and preparing you for a financially secure retirement. For those with more disposable income, hiring the advice of a professional is a worthwhile investment in itself.
Your Net Worth Is Increasing Annually
If your net worth is increasing year by year, it shows that you are managing your finances well and that you have excess money to save or invest each month. It also shows that you are effectively paying off any debts that you may have accumulated in your younger years.
You Don’t Live Paycheck to Paycheck
Not living paycheck to paycheck means that you can cover all of your monthly expenses and contribute to savings or investments. Forbes reported on a 2023 survey that found “78% of Americans live paycheck to paycheck, a 6% increase from the previous year.”
You Can Make Large Purchases Without Worry
Having the cash to make big purchases, such as cars or luxury goods, without it impacting your financial security means that you have a good level of disposable income. It can be a good idea to set up a direct debit for money you want to save for these items; this will quickly build a fund for when you’re ready to purchase them.
You Regularly Update Your Will and Estate Plans
If you regularly review and update your will and estate plan, it demonstrates that you have a proactive and positive attitude to your finances. Putting a tax efficient and well thought through plan together means you can pass on your wealth to your loved ones in the best way.
Your Children’s Education is Secure
Starting to save as early as possible for school funds and keeping it consistent means that you’re prepared for whenever your children need it. This helps to ensure you’re children have the best opportunities and will kick start their own wealth.
You Feel Financially Secure
Feeling confident in your ability to pay for the things you need, the things you want, and the unexpected costs that you may face shows that you are secure. Being able to save and invest on top of this means you can meet your long-term financial goals, giving you confidence for the future.
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