Money impacts all of us in some way, and most of us don’t even talk about it. But healthy money management is one of the most important aspects of our well-being and directly affects how happy and fulfilled we are in life.
In this post, we share 13 simple telltale signs of a healthy money mindset that paved the way toward our FIRE journey and how those helped us reach our financial goals.
Featured Image Credit: IgorVetushko /Depositphotos.com.
#1 You Know Your Income and Expenses
You understand how much your monthly income is and where you spend it all. For example – your earnings at work, return on investments, social security and other things. It also entails costs of rent, utilities, food and social gatherings.
Knowing exactly what money you have coming in and going out is a great way to budget, set financial goals, and determine where your money should go.
This also allows you to make good choices about how and what you want to spend your money on. Understanding where your money is going will help you better gauge what to save and what to spend.
#2 You Have an Emergency Fund
An emergency fund is a savings account specifically reserved for unplanned costs such as an unexpected medical bill, car repairs or even job loss. An emergency fund is basically being ready for life’s sucker punches, so when they come, you can afford to foot the bill without relying too much (or at all) on your savings.
No amount is too small. Consistent saving is an absolute must! We initially saved only $20 per week and gradually built our emergency savings fund up to six months expenses.
#3 You save for the future
The more you are able to take a long-term approach to your money and your finances, the stronger your financial roots will be. By prioritizing saving for the future, you will start paying closer attention to where your money goes. This approach will help you minimize impulsive buys and anticipate costs.
Another integral part of having a healthy relationship with money is setting money aside for retirement. Saving for your retirement is a way of securing yourself financially in the future. By having this future focused mindset, you set yourself up for taking the proper steps to secure your retirement.
#4 You do not measure money against anyone else
By comparing your financial position with others, you will only cultivate envy, jealousy and resentment. Such feelings can be harmful for your sanity, and force you into wrong financial choices. Instead of dreaming about what others have, try thinking of ways that can improve your financial health.
#5 If you Can’t Pay for It With Cash, You Don’t Buy it With a Credit Card
If you start using credit cards for things you cannot pay, it can quickly lead to a mountain of debt.
One more reason to avoid using credit cards for things you can’t afford is that this can give you a fake sense of financial safety. With all of the available credit, it is easy to think that buying now and paying later is workable in the long run. But realistically, this encourages you to overspend and be incapable of putting money away for when you need it most.
#6 You Do Not Keep Credit Card Balances
We know this sounds like a broken record, but we just cannot emphasize it enough. If you pay your credit card balances in full every month, then you have been using a credit card properly and responsibly — meaning that you’re avoiding high-interest rates and debt foolery.
If you take a long time to pay down what you owe on credit cards, this will result in high interest and may negatively affect your credit score. The best way to avoid the consequences of these charges and keep your credit relationship healthy is to simply pay off everything you spend on your credit card at the end of each month.
#7 You Invest in Yourself
You continue to prioritize self-investment by investing heavily in your education, skills and personal development.
You take courses, workshops, and look for mentorship because you are constantly looking for ways in which to grow — you seek growth on a personal level, as well as, professionally. When you do this, you are doing yourself a favor and investing in your future.
#8 You don’t overspend on luxury goods
You don’t overpay for luxury goods, such as Valentino dresses or Porsche cars. This basically means you do not pay for emotional issues.
This shows a great awareness of your financial hopes and dreams, as well as, a determination to live within those means.
Not spending on flashy luxury items is an early sign that you have some measure of financial responsibility and discipline, which is critical to a good relationship with money.
In its place, you reckon that happiness and knowing what satisfies you comes from the inside.
#9 Willing To Bargain
When it comes to negotiating and representing yourself and your money, you know what you want and are not shy about asking for it. This shows you have high self-worth and are willing to ask for what you are worth, whether it is more money, better benefits or superior terms on a loan or contract.
#10 Your Credit Score is in Good Shape
Your credit score is high — proving that you have a healthy track record of borrowing money and paying your bills on time.
Having a good credit score is key to a healthy relationship with money as it allows you to get the lowest possible interest rates, the best loan terms, and more financial options.
On the other hand, a less-than-desirable credit score can lead to limited access to financial options and higher interest rates or even prevent you from securing basic human needs like housing or employment.
#11 You don’t feel guilty about spending money on yourself
It could be a new phone or buying yourself a new pair of shoes, if it does not make you feel guilty for doing so, then it must be a positive sign that your finances are on the right path! Rewarding yourself can keep you motivated and productive—it is wonderful to enjoy those well-earned labor fruits.
If you feel guilty for spending money on yourself, it may be because you are living beyond your means.
Remember, treating yourself doesn’t need to mean breaking the bank. So, whether you grab a latte on the way to work, buy that next book, or treat yourself to some new clothes, it can be a nice way of rewarding yourself for all of your hard work.
#12 Money Doesn’t Rule Your Emotions
A subtle sign that you are in a good financial state is that your feelings aren’t running the show when it comes to money. Whether it be fear, greed or excitement – none of these affect you by driving you to make emotional decisions over rational ones.
Disclaimer – This list is solely the author’s opinion based on research and publicly available information.