20 Signs You Are On the Right Financial PathSubmitted by Castlebar Asset Management on May 13th, 2015
Setting yourself on the right financial path is rewarding financially and will help to reduce stress from your life.
Here are 20 signs that you are on the path to financial independence:
1) You Don’t Lose Sleep Over Money
When you go to bed at night you are sleeping great. If anything is keeping you up it is not your finances. There are clear financial benefits to having your financial life in order, it will reduce stress levels.
2) You Are Comfortable With Your Budget
Setting a budget is one of the building blocks on getting yourself on solid financial footing. Using your budget as a monthly guide to your spending will keep you on track. When you are comfortable with the budget it will make spending easy. You’ll feel great each month knowing you’re spending intelligently and not wasting your hard earned money.
3) You Don’t Feel Guilty When You Splurge on Special Occasions
Everyone has splurged on items in life. Maybe you bought a little nicer car than you could afford or spent more on a dress for a special occasion. These things happen, but if you have a birthday, anniversary or other special occasions you can spend more than normal to celebrate! You should build some wiggle room in your budget so these don’t become budget busters.
4) You Can Actually Afford to Buy Things You Want
Sticking to your budget is important but giving yourself flexibility to buy those occasional items you really want is a great feeling. Allowing yourself to buy a new iPhone or some great running shoes is far more rewarding than going broke on impulse spending.
5) You Are Able to Support Your Favorite Charities
Everyone has their favorite non-profits they love to support. You are able to give to these great organization and know it will not impact your finances. You’re able to support them and feel great about doing it.
6) Your Account Balances Grow Year After Year
By spending less than you earn each year you are building a financial snowball. Once you push it down from the top of the hill it gets bigger and bigger each year. There will be bumps in the road when financial markets pull back but you won’t be deterred. You will be able to continue to save and invest for your future.
7) You Are Prepared For a Financial Emergency
Being prepared for a financial emergency is another cornerstone of a stable financial plan. When an unexpected event happens like someone in your family falls ill, you have a surprise house repair or any other unplanned event occurs the last thing you want to be concerned about is your finances. You have your rainy day fund and can focus on the issues at hand and not worry about money.
8) You Don’t Need Your Job
You have also set up your rainy day fund so that if you lost your job you have financial flexibility. The stress of losing your job is bad enough, but if you are living pay check to pay check then it only makes a bad situation worst. This will allow you to be patient in a job search and not have to take the first job offered just to pay your bills. Your rainy day fund should have three to six months of expenses in it.
A wise colleague told me early in my career “Never work because you need your job.” Now most of us can’t up and quit our jobs tomorrow. If you set your budget up and live within your means, work is far more enjoyable. Going to work every day just to pay for your excess lifestyle will bring a ton of unnecessary stress to your life.
9) You Are In Control of Your Money
You feel in control of your money and not letting your finances control you. Your financial situation may not be perfect but you are using a budget, have a plan to save and are not letting debt dominate your spending. See #1!
10) You Have A Clear Understanding of Your Financial Goals
You know the three or four major financial goals you want to achieve and how you’ll get there. Whether you have worked with a financial planner or investment advisor or have created a plan on your own, you know what your goals are, how much you will need to contribute and how to invest to reach your goals.
11) You Use Credit Cards For Your Own Benefit
Credit cards can be the gateway drug for poor personal financial decisions. You pay your cards off each month and get to use the rewards the cards offer for your benefit. Whether it is cash back, airline miles or gift cards you can make money off your disciplined use of credit cards.
12) You Are Contributing More to Your 401(k) Than Just the Match
Your company offers a matching contribution to your 401(k) of 3% or 4%. You have done the math and realize that your contribution and their contribution is not going to be enough to meet your retirement goals. You are contributing more than the match and are working to max out your 401(k).
13) You Understand the Benefits of Paying Yourself First
One of the most valuable lessons a parent can teach their children is too pay themselves first. When you commit to putting money into your retirement accounts, savings and other accounts before you spend a penny it will set you up for financial success.
14)Your Mortgage Does Not Dominate Your Budget
Your mortgage is likely your biggest monthly expense. If your mortgage dominates your budget it has a cascade effect through your financial life.
15) You Are Confident About Your Financial Plan
Your financial plan is set up and you are contributing to your various accounts and monitoring the investments. You are confident that having a road map is going to help you achieve your financial goals.
16) You Are Comfortable Talking About Your Finances
Many people have a fear about discussing their finances. They feel embarrassed because they have a ton of debt or have not saved enough. They’ll put off meeting with a financial planner, investment advisor or estate planning attorney because they are not comfortable taking about money. This can create a domino effect.
Those who have their financial house in order are comfortable talking about money and finances and don’t fear meeting to discuss what is best for them financially.
17) Your Debt is Under Control
Being debt free is an awesome financial goal to have. If you are on the path to financial independence but still have some debt (like a mortgage) knowing your debt is under control will give you peace of mind. Not having to a make monthly payments for a car, student loan or for credit cards will allow you to have so much more financial flexibility.
18) You Feel Comfortable About Paying For College
College is creeping closer every day for your kids! You know that college costs are growing at an insane rate but you have a plan. You are contributing to a 529 plan, plan to tweak your family budget so you’ll be able to use more of your income and helping your children earn scholarships.
19) You Have the Correct Insurance In Place
You know your home owners, auto and life insurance provides you with the appropriate level of coverage for your financial situation. You are not wasting money with unnecessary insurance producers and conversely being stingy with your coverage and leaving yourself financially vulnerable.
20) You Have Your Estate Plan Updated
You have met with an estate planning attorney and have completed a will or trust along with the other necessary powers of attorney and healthcare documents you need. Also you have told family members or friend where to find these documents in the event you ever need them.
If you went through this list and checked 16 of 20 items then you are a superstar and on the way to financial success. If you found yourself saying hey I need to be in a better position, let’s talk!
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.