If one of your goals is to become a better manager of your money, you’ve likely been taking steps toward improving your financial habits. However, you may not feel financially successful. Roughly 58% of young adults said they felt they were lagging behind when it came to financial success, according to a PNC study.
Over time as you make necessary changes, you may start feeling like a financial success, but that alone isn’t enough to measure your progress. How do you know you’ve finally achieved financial success? Here are 10 ways to know if you’re financially successful in life.
10. You have clear financial goals
Hoping and wishing won’t get you anywhere. It’s difficult to achieve financial success if you don’t have clearly defined money goals. Knowing how you want your money to work for you as well as how and when you plan to achieve your top money goals shows you’re a money success. If you don’t have any goals for your money, you can’t expect to achieve great things and you’ll have no way of knowing when you’ve made significant progress.
Start developing a list of financial goals today. For example, do you want to purchase a new home? Make a plan to start saving a set amount each month. Planning — instead of hoping — will help you reach your goals faster.
9. Your credit isn’t a mess
Another big sign of financial success is the way you manage credit. Financially successful people aren’t messy when it comes to the plastic. If you have a good to excellent credit score and you only use your credit cards when it’s necessary (instead of as a tool to bridge a financial gap) you’re doing a good job with your money. Start on the path to better credit by ordering a copy of your credit report. When you know what’s in your report, you can be proactive about correcting errors that could be pulling your score down without you even knowing it. Consumers are eligible to receive one free copy from each of the three major credit reporting agencies every 12 months. Visit AnnualCreditReport.com for your free copy.
8. You have multiple streams of income
You’re not afraid of losing your job because you have more than one source of income. In addition to your full-time job you have a side job or business. You also invest your money. This way, when layoff rumors move through the grapevine at work, you’re calm because you know you’ll still have a steady stream of income.
7. You don’t take advice from just anyone
One bad piece of money advice can put you on the path to financial disaster. A financial success realizes it can be dangerous to take advice from anyone who doesn’t have the appropriate qualifications. That means friends and family, unless they have a financial credential, are not the best sources of money advice. Instead, when you need financial guidance, you seek the counsel of a financial professional such as a certified financial planner.
6. You know the difference between needs and wants
When you’re living a financially successful life, you know the difference between needs and wants. You don’t put off needs so you can afford the things you don’t really need. You understand and accept the benefits of delaying gratification so you can achieve your financial goals. If you have trouble differentiating needs from wants, take time to think through your purchases. Stop and ask yourself, “Is this a need or a want?” If you’re still unsure, instead of rushing your purchase, take a few days to think about whether you can do without the item or if you really need to purchase it right away.
5. You’re not burdened by debt
It’s easier to become a financial success if you have a low debt-to-income ratio. Those who come out on top know when to close their wallet and put a stop to spending before it gets out of hand. They also understand credit cards shouldn’t be the primary means for making everyday purchases. If this doesn’t describe you, consider joining a financial support group such as Debtors Anonymous or Shopaholics Anonymous.
4. You have a budget
Budgeting is a must for financial success. You track how much money is coming into and going out of your household and you have a clear idea of which bills are due and when. You don’t groan when it’s time to go over your monthly expenses. Instead, you get excited, because you know your budget is a tool to help you manage your money well and prevent overspending.
3. You have an emergency savings fund
Saving is a way of life for you. If a financial emergency comes your way, instead of scrambling for cash, you’re prepared. Credit cards or a loan from a friend or family member isn’t your first choice. You have at least three to six months’ worth of savings, and you don’t dip into your emergency fund unless it’s absolutely necessary.
2. You’re saving for retirement
Instead of focusing on the here and now, you have one eye on the future. You understand the impact time has on your money’s ability to grow, so you started investing as soon as possible. You’re also up-to-date on the latest retirement tools.
1. You don’t shop just for fun
You’re in control of your spending and you shop with a purpose. Although shopping can be fun, you always look for deals and do your best to make your money stretch as far as possible. For financial success, you don’t approach shopping as recreation. Instead, shopping is simply a means to make a purchase.