Successful money management can manifest itself in a lot of ways that there can be times where you miss it. It is crucial that you identify these signs because it can steer you in the right direction. It can also help you stay away from harmful habits that can bring you down. Here are some of those signs that you are actually doing good with your finances.
Paying your cards in full every month
Successful money management can be seen with how you pay your credit cards every month. A good number of people use their cards and integrate them into their household budget. This works for some people but if you are doing it out of a need to make ends meet, you might be using your credit cards the wrong way. It can come back and haunt your finances especially at the end of the month.
This goes to show that using credit cards is not all that bad if you know how to make the most out of it. If you use it and able to pay the entire amount once your statements come in at the end of the month, you are on the right path. Paying your bills in full at the end of the month is one of the signs that you are able to manage your finances successfully.
One of the reasons why successful people choose to pay their credit card usage in full every month is because minimum payment slowly kills their finances. It can keep your account current but it will also give your lenders the chance to add several fees and charges on your card. You can end up paying more on interest than the principal amount. This is why it is always a good idea to pay off your credit card bill in full every time.
Successful money management means having a strong emergency fund
CNBC shares that about 39% of Americans would have a challenging time covering a $1,000 emergency. This is quite alarming because you will never know when you will need an emergency fund. It can come all of a sudden and catch you off-guard. It could be a minor repair at home, a quick fix for the car, or losing your job.
Having a strong emergency fund is a good indication that you are managing your finances well. It takes quite a while to reach a target amount for your reserve funds. This is because the normal practice is to set aside a small amount every month and work over a set period of time to help you reach your goal. It is uncommon that you would set aside a large chunk of your income towards your emergency fund savings.
If you already reached your target, it usually means you have been working hard not only in saving it but also making sure that you do not squander off the amount. These takes discipline to accomplish over a period of time. Your emergency fund will also give you the chance to lower down your stress level knowing you have some financial cushion when emergencies happen.
You are able to save without sacrificing a lot
Saving money is one of the signs of successful money management. However, there are people who do it only if they sacrifice a lot of things in their budget. Financial management has a lot of sacrifices and compromises but it should not take away too much from you. If you are able to save money without sacrificing a lot, you are doing something right.
If you have to sacrifice a lot to the point where your life is starting to be miserable just to save money, you might need to step back and assess the situation again. You could be missing out on life already as you prioritize saving money. Sooner or later, you will realize that your children are all grown up and you never took on vacation with them.
Your short and long term goals are clearly defined
Successful money management is not always what you have in the bank. If you have your goals clearly laid out, that is one sign that you are able to manage your finances well. This is one financial area a lot of people overlook because they are too caught up with the present that they forget to lay out their plans for the future.
If you have your short and long term goals clearly laid out, you have a pretty clear picture of what you want to get out of life. If not, you run the risk of going around in circles not really having a heading in life. You might start to chase the wrong things in life and lose a lot of time. Sooner or later, you could be too far off your course and have a more challenging time to get back on track.
You are aware and able to manage your spending habits
The spending habits of people differ from one person to another but one of the signs of successful money management is knowing what your habits are and having the ability to get them in check. The first part of this process is identifying the habits that can put your finances in peril. Once you do, you need to put some safeguards to make sure that you do not get into money trouble because of it.
If you love shopping and you know that a sale in your favorite shop will make you spend more than what you budgeted for, find ways to address that issue. If you really need to buy something, bring cash with you so you do not overspend. You can also use a debit card to help you limit your spending to the amount in your account.
Credit card use is not out of necessity anymore
Successful money management can also be seen when you are using your credit cards to improve your finances and not out of necessity. Forbes shares that credit card debt reached a high of $870 billion in 2018. It might be a little difficult to understand the reasons behind the increase but it should not be out of necessity.
Credit card use can actually help you improve your finances if done right. For one, it can give you the ability to organize your spending by card. You can use one for all food-related expense and another one for transportation expenses including gas and maintenances. This helps you manage your money and you use the money not out of necessity.
You are looking forward to retirement
There are times when retirement seems too far off simply because you do not have the funds you need to retire yet. Your target date might be nearing but you cannot see yourself retiring yet because you are way off target. This is why if you are looking forward to retirement because you are on track with your savings, you are managing your finances well.
Successful money management can help you move forward with your finances and assure you that you are doing the right thing. If you miss out on these signs, you might think that you still have a long way to go and change things that are working for you.