Managing money may sound complicated or difficult at first glance. You have to answer several personal finance questions, such as:
- Am I saving enough money to get through this pandemic?
- Do I need a traditional or Roth IRA?
- How much money should I put in my emergency fund?
- Is investing in the stock market a good idea?
- Do I need to hire an accountant to do taxes for my business?
Tackling these questions can be overwhelming, but you may be doing better with money than you realize if you have the solutions or answers to these questions.
If you need a little more assurance, here are a few indications that you are excellent with handling money:
1. You are Planning a Major Purchase
Major purchases can cost a lot of money.
Take buying a house as an example. Purchasing your first home can take years of planning. You have to consider a range of factors, such as the finding the right house for you and your family, comparing reliable mortgage brokers, saving money for down payment and improving (or maintaining) your credit score.
If you’ve anticipated, priced out and began thinking about how to afford any kind of major purchase more than a few months from today, you’re in good financial shape. Establishing financial goals complete with price tags is a crucial part of being wise about your money.
2. You are Using Credit Cards Wisely
Many use their credit cards without giving much thought on the amount of money they are spending. If you’re great with your money, you’ll know exactly how to use these plastic cards to your advantage.
If you use credit cards, you should be able pay off the entire balance (and not just the minimum monthly due) each month. By paying off your balance completely, you are avoiding finance and interest charges.
3. You Have a Savings Plan
A person who’s great with handling their finances don’t just set aside whatever money is in their wallet. They have a good plan on how to save every month.
You’re good at saving money if you set aside a portion of your salary or income toward a financial goal. An example is setting a goal of having $24,000 in your bank account after 12 months. This means that you need to set aside $2,000 per month to achieve your goal. If you’re doing something similar to this, then you’re on the right track.
4. You Avoid Making Impulse Purchases
Many can’t and won’t track their expenses, as they don’t want to find out exactly how much of their hard-earned dollars are going to luxury purchases. Impulse buying pushes you to go over your budget and may even push you to spend in advance by buying with your credit cards.
If you are good with your money, you focus on purchasing what you need. If you want something but can’t afford it right now, you do two things: plan that purchase and wait a little while until your budget allows for that purchase.
5. You Have Automatic Recurring Regular Payments
Many Americans juggle several bills a month. They, for instance, have to settle their energy bill, credit card outstanding balance, periodic subscription fees and more. Staying on top of your money, therefore, can be quite challenging if you have a lot of bills to pay.
If you’re good with money, you know exactly how to arrange automatic recurring payments with your expected monthly expenses. When you have recurring payments, you won’t have to worry about missing payments that can negatively impact your credit scores. What’s more, you won’t have to pay late payment charges that can ruin your budget and flush your hard-earned dollars down the drain.
6. You Grow Your Money by Investing It
Putting money in a bank account isn’t enough. Individuals who want to grow their dollars will need to invest their hard-earned cash. You’re great with handling money if you invest your money while you focus on other things.
When you put your money in stocks, bonds and other investment instruments, your dollars have the potential for growing way beyond what you would see in a conventional savings account at your local bank.
Does this mean that you need to pick the best investment instruments every single time? The answer is not necessarily. You could put a portion of your hard-earned cash on low-cost index funds — just like what conservative billionaire Warren Buffet does.
Being fantastic with money doesn’t mean that you should have a million dollars (or more) saved up in an account. It’s about knowing how to handle your funds and thinking strategically.