Are you good with money? Do you think you are capable of making responsible financial decisions?
Truth be told, it’s sometimes difficult to tell if you are handling your finances the right way, especially if you aren’t knowledgeable in the various areas of personal finance. Let’s just say you could be clueless.
However, there are certain indicators you can look out for—signs you are good with money. You can use these signs as a metric to measure your financial progress.
Before I became quite self-aware and intentional about improving my financial situation, I had no idea what I was doing. I couldn’t tell if I was getting better with money or if I stood stagnant. But I eventually reached a turning point—when I started pinpointing signs that proved I was in a better place in my finances. This became a huge motivation that compelled me to keep thriving.
As you read on in this blog post, we’ll discuss some of the most important signs that indicate you are good with money. Let’s get right into it.
What Does It Mean To Be Good With Money?
Being good with money means you are evidently making progress in various areas of your personal finance. It means you spending wisely, staying committed to your savings goals, having an emergency fund, preparing well for retirement, and doing every other important thing to ensure your financial security.
How To Know If You’re Good With Money: Top 12 Signs
Do you want to know if you are on the right track with your finances? Here are some signs you’re actually doing okay with money:
1. You Will Have A Steady Flow Of Income
Having a steady flow of income is a situation where you earn enough money consistently to cover your bills. This is one of the most obvious signs you are good with money.
Interestingly, you don’t need to be an employee (earning a regular income) to have a steady inflow of cash. Even as a business owner, your income can be steady. You only have to make sure that the business thrives, yielding enough profit to keep you afloat.
Besides, one main benefit of having a steady flow of income is that it enables you to increase your net worth and grow wealth. With money coming in consistently, you can pursue your financial goals, save, and invest.
2. You’ll Have A Good Spending Pattern
Not having frivolous spending habits is one of the signs you are good at managing money. You must know your spending pattern and ensure that it doesn’t impel you to live beyond your means.
How much do you earn every month? And how much goes out? If you are able to live within your means by reducing your spending, then you’ve made a brilliant financial decision. It means you are good with money.
Having a bad spending pattern can harm your finances in various ways—including causing you to pile up debt.
When you spend beyond your financial capacity, it’s normal that you’ll run into debt. In a bid to cover your expenditures, you will either be tempted to max out your credit cards or take a personal loan.
3. You’ll Save Money
I wouldn’t be able to achieve many of my financial goals if I wasn’t saving for them. This is because I understood the principle of delayed gratification. Saving money is very crucial if you must excel financially.
Of course, this doesn’t mean you shouldn’t spend your money on immediate needs. However, proper planning suggests that you should think of the future even as you focus on the present.
So while keeping money for rent, groceries, and children, don’t forget about future goals like retirement and your kids’ college education. Stashing some cash away for the purpose of achieving these long-term goals shows you are committed to securing your finances. It’s one of the signs you are good with money.
4. You’ll Plan For Retirement
Many people make the mistake of planning for retirement late. That’s a very wrong path to take.
I remember completing college and getting a job almost immediately. It was a great feeling, knowing I didn’t have to job-hunt for a long time. But amidst the excitement, I was concerned about my future—planning for retirement.
As soon as I got my first paycheck, I decided a portion of that income would be put toward my retirement fund.
I’m not saying it’s easy. But it’s very possible. The good thing about starting your retirement plan early is that you don’t have to rush or feel pressured.
If you start saving in your 20s, for example, you won’t have to be desperate. Investing %5 of your income over the next 3 or 4 decades will certainly make a huge difference.
If you are already saving for retirement, great job! That’s a good sign. If you haven’t started, it’s not too late. Create a 401(k) account and start planning.
5. You’ll Be Prepared For Emergency Costs
One of the common signs you are good with money is that you’ll be prepared for emergency expenses. Yes, you can’t always predict the things you are going to spend your hard-earned money on. As much as you’ve deliberately decided to spend only on your essentials, emergency costs can eat into your income at any time. This is why it’s super important to be prepared by building an emergency fund.
An emergency fund is the amount of money you have saved over time solely to pay for unforeseen costs.
Imagine your car’s tire gets punctured on your way from work. You’ll have to fix it immediately since you need your car to commute to work regularly. Without an emergency fund, it’s possible you’ll have to rely on a credit card. That’s the same thing as taking a loan because you are actually spending someone else’s money.
An emergency fund can also prove to be very essential during very difficult times. For example, if you suddenly lose your job or if the world is hit with another pandemic, what do you do? To survive, you need an emergency fund that can cover 3-6 months of your basic expenses. That may be enough time for you to get your finances back on track.
6. You Must Be Budgeting Your Income
Having a budget to plan for your income is key. It’s the only way you can purposely spend your money without making too many unnecessary purchases.
It’s safe to say that one of the reasons some people can’t track their spending or effectively manage what they earn is that they don’t have a budget.
A budget simply helps you to list your expenses and allocate money to each spending category. You’ll be able to organize your fixed and variable expenses without feeling overwhelmed. But more importantly, at the end of the month, you’ll be able to determine how you spent your salary.
Besides, if you need a guide on how to budget your income, you should check out this post that discusses the 5 easy steps to budgeting.
7. You’ll Be A Step Closer To Your Financial Goals
We all have various financial goals that we look forward to achieving. From purchasing a new house to taking your family on vacation, these goals can contribute largely to our happiness. So when you realize that you are a step closer to bringing your dreams to fruition, that’s one of the signs you are good with money.
For example, if the total amount needed to make a down payment for a new house is $30,000, and you have already stashed away $10,000—then it’s obvious that you are close to achieving the goal. Recognizing this progress and commending yourself for it can spur you to take bigger steps.
8. You’ll Have A Good Credit Report
Your credit history helps lenders determine if you are eligible for a loan or not—when it’s time to purchase something like a house or car. Now, although many people tend to ignore it, checking your credit report and seeing that you have an impressive score is one of the signs you are good with money.
On the other hand, you can take certain steps to ensure that you maintain a good credit history. For instance, if you regularly use credit cards, always make sure you pay on time. Late payments will not only attract extra fees but may damage your credit score.
9. You Won’t Have Any Credit Card Debt
While it may seem okay to use credit cards, it’s not the best option for someone looking to improve their finances.
Getting a line of credit is simply taking someone else’s money to spend, hoping to pay it back later. Now if you spend irresponsibly, you could pile up more debt than you can actually pay in time. This can be a major financial problem as you struggle to pay down your credit card debt balance.
However, simple steps like shopping with cash or your debit card can prevent this problem. If you manage to live without credit, that’s enough proof that you are good at managing your income.
10. You Must Be Investing
Investing is one of the signs you are good with money. You can’t build wealth just by saving a tiny amount of money every month. You need to tap into the right investment opportunities that can grow your money faster. Thankfully, there are numerous ways you can invest even if you don’t have a lot of money.
For example, aside from saving in a 401(k) account, you can venture into Real Estate Investment Trust (REITs)—where the holding company uses your funds to invest in a property. This is actually a great option if you don’t have enough money to actually buy a property outright. REIT gives you the opportunity to still invest in the real estate market without being a “rich” investor.
11. You’ll Be Willing To Learn About Finances
Are you willing to improve your financial mindset? Are you enthusiastic about learning the basics of personal finance? If yes, then that’s one of the signs you are doing good with money—or at least on the verge of making better financial decisions.
Through self-education, you can start learning about things like investing, savings accounts, frugal living, or growing your money into wealth.
Just by listening to podcasts by personal finance experts, you can gain insight into how to develop the right money habits. On the other, if you prefer reading, check out these 10 personal finance books of all time. They will transform your mindset concerning money.
12. You’ll Be Willing To Discuss Money
Discussing money with your partner or kids is one of the casual ways to get better with your finances. You can avoid a lot of mistakes and manage future expectations just by analyzing your current financial situation. If you already do this, then it’s one of the signs you are good with money.
I make it a goal to have money talks with my family. We don’t take it too seriously. We are not usually tense about it. Just like every other normal conversation, we sometimes talk about how to improve our finances as a household.
To discuss money most times, you have to begin by asking the right questions. Do I track my spending? Why do I miss debt payments? Why am I not saving for my kids’ education? Asking relevant questions like these will put your mindset in the right state to develop solutions to your problems.
Recap: Signs You Are Good With Money
Doctors often tell us how to be good with our health. By eating right, exercising regularly, and getting enough sleep, we can stay healthy and avoid running to the hospital due to a sudden illness.
This is the same way you are to look after your finances. Let’s be honest. After health, money is probably the most important thing in one’s life. So why would you risk fumbling your finances?
Since this post has talked about signs that prove you are good with money, you can now use them as a yardstick to always measure your financial progress.
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