You Never Overdraw Your Checking Account
If you’re one of those people who overdraws their checking account all the time, then you need to take a step back and look at your personal finances. The first step is to take a balance sheet look at your checking account.
While almost everyone who has a checking account has overdrawn it at one time or another, that doesn’t mean it is something that’s acceptable. Not only is it an embarrassment for you to post a check with overdraft fees on your social media accounts, it’s also a sign that you may not have the maturity or discipline to manage your personal finances. It’s a sign that you don’t understand the importance of balancing your check book and managing your money.
If you find yourself overdrawing your account frequently, you may need to consider a savings account with a higher limit that would help you manage your money better.
To be clear, it still isn’t an excuse to overdraw your account if you need some extra cash in a pinch. You still need to transfer money from your savings to your checking account to cover the expense if you’re really in dire need. Whenever possible, be sure to try pay for your expense in cash.
You Don’t Lose Sleep Over Finances
Financial stability means having a cash reserve of money set aside for emergencies. Having some money set aside gives you a sense of security and lowers your stress level. Financially stable people don’t lose sleep over their money.
Standing still is the same as falling behind, so a financially stable person would also:
- stay on top of their bills.
- try to eliminate debt to the best of their abilities.
- have a savings and investment plan to weather financial storms when they arise.
- have multiple streams of income to hedge their bets.
- invest in intelligent ways.
- pay themselves first by contributing to their retirement savings first and foremost.
You Use Credit Cards for Convenience and Rewards – But Never Out of Necessity
This is a huge sign of financial competence. Sure, you can always use cash as a means of payment but credit cards are so much more convenient. With credit cards, you can essentially buy anything you want or need instantly. You can pay for your purchases over time at a convenient rate. So, you can buy things like cars, laptops, and even groceries.
However, the biggest advantage of credit cards is that they come with rewards. Every time you use your credit card, you’re earning points. Some credit cards even reward you for paying your monthly charges and spending a specific amount on your card.
That’s a perfect reason why you shouldn’t be stressing over your credit card payments. You’re not using your credit cards out of necessity or because you don’t have the cash. You’re using it because it’s the easiest and most convenient way to buy things you need and earn rewards.
You Don’t Worry About Losing Your Job
You can be hit with a natural disaster, violation of rights ,your job can get outsourced to an overseas company, get injured, or get sick and not be able to work and you are not concerned about your finances.
You’re Never Late With Payments
This is an easy sign to check off your list: pay bills at least a week ahead of time if possible or on time. If you need to be late, it means you’re not financially stable. Life isn’t perfect and there’s always going to be a reason to be late.
But if you have a consistent payment history, this is evidence of stable finances.
You Pay Your Bills Ahead of Time
You can’t consider yourself financially stable until you pay your bills on time. You want to make sure you can afford to pay your rent, your bills, and other financial obligations on time. We’re not just talking about meeting the monthly minimums but actually paying on time. Not only does this save you possible late fees but it also brings your credit score up. It is a difficult process to get out of debt if you don’t pay your bills on time.
People Ask Your Opinion About Financial Matters
When you engage in personal finance discussions, most people tend to take your opinion seriously. This is because it is the rare individual that makes it a point to study money management and the economy. Your out of the box thinking will help you stand out from the crowd.
You’re Generally Happy With Your Financial Situation
One of the first things you should know is that you don’t need to have hundreds of thousands of dollars socked away for emergency funds or investments to consider yourself financially stable. Financial stability goes beyond saving money for the future … it’s also having confidence in your financial situation.
We tend to believe that being financially stable means being rich or having a high net worth, but that isn’t necessary true. Passing the 27 signs with flying colors doesn’t mean you have millions of dollars in the bank or that you don’t have debt. It just means that your overall financial picture is doing well and you are generally happy with it.
You Have No Ugly Credit Card Balances
Note that this can be applied to any type of debt. Credit card debt is the most problematic as it can cost you dearly with its high rates and without you even knowing it.
Credit card companies are now determined to get as much money from you as possible. They can even use high-tech devices that record your hand movements as you enter your pin number.
When I say bad debts, they are also debts that you have no intention to pay off any time soon like the ten thousands of dollars you owe the casino.
When you have all kinds of debts, including it credit card debt, you end up in a complex web in which you are making and losing money. You earn enough money to pay your monthly bills yet you never manage to save anything.
As long as you don’t have any debts to pay you are on your way to financial stability. Make sure that you spend less than you make. Save some money. Pay off your debts.
You Finance Your Cars Over Five Years or Less – If You Take Loans at All
Financial stability means not throwing every single penny at the situation to solve problems, which only delays the real solutions. If you have financial stability, you can put your money towards saving for retirement, building up your emergency fund, and working to eliminate your debt. You should reduce your mortgage to a number you can easily afford.
You Contribute a Double-Digit Percentage of Your Pay To Retirement
You Don’t Feel Guilty When You’re Out For Special Occasions
It’s a good feeling to treat yourself to a nice dinner or weekend getaway, but the feeling can become more frequent than you’d like. Even if you can afford to do it, going out for meals and on vacations every week can take a toll on your finances.
If this sounds familiar, it’s time to take a step back and slow things down a little. If you want to be able to enjoy special occasions and celebrate a big win without going into debt, it’s important to be a responsible and careful spender.
The best way to do this is to save up for your celebration. Have at least a couple of hundred dollars set aside that you can use in the event of a victory or special occasion. If you can avoid spending that money on small expenses, you’ll feel confident when you’re able to pay for something special.
You Can Afford to Buy the Things You Really Want
This is a short list of markers ‐ not an exhaustive list ‐ that tells you that you have the financial stability of an adult.
- You can get enough sleep.
- You don’t have credit card debt.
- You have an emergency fund.
- You have a budget you stick to.
- You have a retirement account.
- You have the money to buy the extra things you want: that coffee, that movie, that book.
- You have hobbies.
- You own your own home.
- You have the money to buy the things you really want.
- You have a hobby and / or a craft you enjoy.
- You have hobbies and learn new things about life and the world on your own time.
- You are comfortable with asking for help when you need it.
- You read for pleasure on your own time.
- You can enjoy time alone.
- You can enjoy time with friends.
- You have interests that you pursue.
- You can afford to spend the day doing nothing.
- You can work toward long-term goals.
- You can live through mistakes.
- You have a sense of humor.
Recreational Spending Doesn’t Appeal to You
People with money don’t spend their money on things for recreational purposes. They might have a hobby or two, but normally, a hobby is something that they use as a means to earn money. Be honest with yourself and your financial situation. Are you spending money just to have something to do? This doesn’t mean that recreational spending is bad, but recreational spending does take money away from other places and can leave you quite short on dough. If you are investing in a hobby or doing something to earn money, understanding this distinction and taking it seriously is important. It’s always something that will help you prioritize your money wisely.
You’re a Natural Saver
You are great at saving money, and feel good about putting it away into savings.
You have an emergency fund set up for unexpected life events. You have 3-6 months salary set aside for emergencies.
You budget your expenses and monitor them closely. You are able to respond to changing conditions in the market and not over commit to debt.
You don’t stress about a rainy day emergency fund. You have a reasonable emergency fund and level of coverage.
You set goals to expand your savings. You’re good at expanding your savings in other ways as well.
You’re Generous With Money When it Comes to Charities or Helping Others
Giving money to charities is a great way to feed your ego, while helping others overcome hardship. Perhaps you are more likely to donate to specific causes instead of to any cause.
This does not necessarily mean that you feel the incessant need of proving yourself to others by doing that. However, this behavior could be a sign that you are emotionally unstable about money. In addition to giving money to charities or helping others in other ways, it is also important to provide for yourself. If you are unable or unwilling to pay your bills on time, this could be a sign that you don’t value yourself or just simply that you don’t have the financial capability to do so.
You’re Confident About Your Future
If you’re young, single, and broke, it’s easy to get overwhelmed and feel hopeless about your financial future. You might feel that way, too, if you’re living on a shoestring budget while paying down debt.
But you can be financially stable without accumulating a six figure income or having hundreds of thousands in investments. If you’re willing to take a personal challenge to build up your savings and improve your financial situation, you can get to that point.
There are some practical things you can do right away to feel more financially stable today and for the future. You don’t have to wait for a big windfall to make major changes. You can tackle your financial challenges one at a time to get closer to financial stability. You can start living the way you want to be living now – able to pay off all of your credit cards, spend time with the people you love, and make choices that are in line with your dreams.
A lot of people who have gotten out of debt and change their lives for the better end up telling us that they needed to hit rock bottom before they could be helped. They are totally on board with the old saying, “Out of the frying pan and into the fire.”
Your Net Worth Grows Significantly From Year to Year
Your net worth, or the total value of your assets minus your liabilities, is an important financial number to track. Knowing that you are slowly but surely building your net worth makes you feel good, and it forces you to think about financial goals you may otherwise be lax to achieve.
You Have Substantial Equity in Your Home
You bought your home several years back, and since then it’s increased in value substantially. Now you have enough equity in your home to send your children for four years of college.
You Consistently Live Beneath Your Means
Budgeting helps you live within your means, which makes you financially stable. The ideal way to do that is not to allow yourself to spend more than you can afford, but pay yourself first. Always put a certain percentage of your income aside, and do it before you spend a dime.
As an example, say you are paid bi-weekly and you want to set aside 20% of your income. If you wish, you can take an advance on your salary and do it the first of every month.
While most people have good intentions to do this, many of them succumb to expensive lifestyle expectations. If you want to get ahead financially, you can’t let your friends, family, peers, or media define your lifestyle.
You have to live more simply and stay under your means. If all your friends are always on a spending spree, don’t begrudge them their fun, but learn to live a little more frugally.
A Large Pay Cut Wouldn’t Destroy Your Life
When you don’t have enough savings to fall back on, a job loss can sometimes feel like a “life loss,” meaning your financial situation could be so bad that you couldn’t find a new job if you lost the one you have now.
Reality is, though, that the financial wreckage left after a layoff or job loss is usually not so bad.
Indeed, a little over a year ago I personally took a 50% paycut so I could take the job I really wanted. While those six months were tough financial times, I found another job a couple months later. And the new job was far better than the old one.
My take away is that there are many ways to make ends meet, even with lower incomes. You don’t have to build up huge, risky wealth like a Silicon Valley tech entrepreneur … just have a little bit of cushion to live off of until the next opportunity comes along.
You can make do with a small amount of savings, enough to get started on a new job if you run into any trouble. Also, if you get laid off you can move back in with your parents for awhile to give yourself time to figure things out; that’s a lot easier than you think.
The Cost of Sending Your Kids to College Doesn’t Scare You
Every year, parents and their children sit down and make decisions about where to go to college and how much it will cost. College costs continue to grow faster than inflation, and there’s no end in sight.
Because the costs are so high, most of us worry about whether we will be able to send our kids to college and how to afford it. The cost of sending your kids to college doesn’t scare you because you’ve done your research and you’ve found ways to pay your kids college expenses. You’ve come to peace with college costs and are prepared to send your kids to college.
You’re Totally Unconcerned With Keeping Up With the Joneses
You Give 100% on the Job – Financial Concerns Don’t Distract You
If your financial concerns aren’t keeping you up at night – if you’re not up in the morning worrying about money – then you’re probably financially stable. Maintaining financial stability doesn’t mean you are immune from financial worries, just that your day-to-day life is less likely to be impacted by issues like job loss, broken down vehicles, healthcare bills, or other unexpected financial burdens.
When you’re financially stable, you’re less likely to cut back on what you need or want. You’re not living paycheck to paycheck, and you’re comfortable setting aside money for a rainy day.
You Pay Your Credit Cards in Full Each Month
The biggest sign that you are financially stable is that you keep your credit card balance low on account of a solid monthly income. This doesn’t just mean the basics “ you must pay your credit card in full each month. Late, minimum payments or lump sums you pay don’t count. Don’t rely on your credit card issuer to pay your monthly balance for you because the fees and interest rates can cost you much more than you benefit from.
High-interest card balances add up quickly and significantly reduce your net worth over time. If you have existing card debt, the best way to manage it is to pay as much as you can on your principal debt balance each month and focus your other payment efforts on the card with the highest interest rate.
You Could Survive For Months Without a Paycheck
Being able to survive without a paycheck for up to three to four months is crucial. With the knowledge that you could live without a paycheck for at least three months gives you more breathing room if you don’t want to work. The idea isn’t that you would lay around for three to four months and do nothing, instead you plan to do other things while keeping the house running.
If an emergency happens that keeps you out of work for a time. This will be a big help to your family.
As you strive to increase your financial stability you will need to put aside a certain percentage of your income so that if you face any type of crisis, you will have funds to safe guard you and your family until you can reach your financial stability. To do this you will need at least one or more months of your take home pay. You should also have an emergency account for something that might crop up that takes you out of work for a week or two as well. This is for things such as medical proceedures, a flat tire, etc.
A reserve fund for your family is something that you have to work on even if you don’t think you need it today. Start working on this fund as soon as you get your paycheck so that you can work on a monthly basis to build this reserve fund.
You Feel In Control of Your Finances – Never Dominated by Them
Finances are a touchy subject for most people. There is probably nothing in the world that makes a person feel more inadequate than a lack of cash. But it is a situation that can easily be avoided by just putting small wheels in motion to get you in the right place. There are really only two hard and fast rules that you have to adhere to when it comes to the whole process of financial freedom.