Most people don’t need someone to remind them they’re living on the financial edge. Somewhere, in the back of their minds, they already know. They know they should be saving, know they should be investing and, for whatever reason, they’re not getting it done. What’s more of a surprise is the number of people who are really doing okay and yet remain insecure about their financial position.
If you read a public forum like Reddit’s personal finance forum there are a surprising number of people who don’t get how well they’re actually doing. You might be in better shape than you realize and here’s how you can tell.
You Can Cover An Emergency Expense
If you have between $1,000 and $3,000 to cover an unexpected bill or expense, without borrowing or using a credit card, then give yourself a gold star. That puts you ahead of roughly a third of the entire country! For far too many people an unexpected car repair or doctor bill put them farther into debt. Using debt to pay debts a financial hole many never escape.
You Have Minimal Or No Debt
People talking about “good debt” makes my head spin while I spew green vomit. There is no “good” debt but there is minimal debt. If you have no revolving debt and pay off your credit cards every month, award yourself another gold star. If you have no mortgage debt or student loan debt, give yourself two gold stars. The biggest long con ever run on the American public is the whole concept of the debt economy. Having a mortgage, a car loan and credit card debt is not the American dream, it’s the American debt service nightmare.
You’re Invested In Your Company 401(k)
If you invest in your company 401(k) plan, at least up to the limit of your employer match, you just earned another gold star! That said, you should not be putting all your investment money in your company 401(k) plan. Many company plans are saddled with high fees and minimal fund choices. Invest up to the match your employer pays, then funnel some of the money off to an actual investment account.
You Automatically Save Part Of Your Paycheck
Automated savings, other than a company match 401(k)? Another gold star for you! Not only did you raise your chances of having a comfortable retirement, you also just raised your chances of becoming rich. Rich people get rich by developing frugal habits at an early age. Those frugal habits eventually make you wealthy.
You Keep a Budget and Track Expenses
You know how much you spend and where your money goes. You have at least an outline of a budget and update it at least once a quarter. There’s another gold star for you. Budgeting and tracking your spending is one of the keys to avoiding impulse spending which tends to mire people in debt. Keeping track of your spending is the very first step on the path to financial responsibility.
If you got at least three stars, then you’re probably doing better than you think and now you have an outline for what to work on next.
