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Top 5 Signs You’re Doing Well Financially in America (Even If It Doesn’t Feel Like It)
Maybe you don’t have $1 million in the bank, but that doesn’t mean you’re not doing well financially. Your account balance is not necessarily a measure of how well you manage your money, nor is it a guarantee that you will have a comfortable nest egg in retirement.
Even those with a high salary may spend money faster than they earn, or spend beyond their means to “keep up with the neighbors.” Or they use credit to finance a lifestyle they otherwise couldn’t afford, accumulating debt (and lowering their credit score), which could affect them later in life.
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Performing well financially has more to do with your financial habits, which can set you up for lifelong success. Here are 5 signs that you’re actually doing well financially in America — even if it doesn’t always feel like it.
1. You are financially literate
If you understand financial terms and concepts – such as compound interest and how it works — then you’ll be in a better position to make smart financial decisions. To be financially literate can help you create a budgetmonitor expenses, manage debtinvest your savings and retirement plan.
For example, if you understand inflation, then you will understand how to plan for retirement taking inflation into account. And if you know your way around inflation calculators, you can calculate how much time and monthly savings you’ll need to reach your goals.
2. You have a budget – and actually stick to it
O average salary for full-time workers in the U.S. it was $1,139 per week in the first quarter of 2024, according to the U.S. Bureau of Labor Statistics. This equates to $59,228 per year.
Even if you fall below the average salary, it doesn’t necessarily mean you’re not doing well financially. If you have a budget, spend less than you earn and set aside a portion of your income for emergencies and retirement savings – and you avoid the lifestyle As you earn more money, you create healthy habits that will help you accumulate wealth over time.
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3. You understand good credit and bad credit
Do you have debts? This doesn’t mean you’re a financial mess. There is good debt and bad debts, and having good debt is not necessarily a bad thing.
The default is quite obvious. It means accumulating debt to buy things you don’t need (and can’t really afford). Or do you finance your lifestyle – like eat out at fancy restaurants every weekend – with credit.
The average credit card balance among U.S. consumers was $6,501 in the third quarter of 2023, according to Experian dataan increase of 10% compared to the same period of the previous year.
Credit cards are not necessarily bad. In fact, you can use them to build credit by making full payments on time rather than carrying a balance.
But if you only make the minimum payment each month, you’ll likely be paying a portion of your ever-increasing interest — not the principal — on your ever-growing debt. This can hurt your credit score, meaning it may be harder to get approved for loans later (or you may end up getting less favorable terms on those loans).
Good debt, on the other hand, can help improve your net worth. Mortgages It is student loans They are often considered good debt as you are expected to get a good return on investment.
4. You are saving your money
No matter how much you earn each month, saving a portion of those earnings is a sign that you have your financial situation in order, as even small amounts add up over time. It’s even better if you set up automatic contributions from your paycheck to an employer-sponsored account. 401(k)so you never miss a month.
Ideally, you want to have at least a few thousand dollars available in an emergency fund and a portion of your paycheck earmarked for retirement savings.
Another sign that you’re okay? You’re willing to build wealth over time by calmly weathering the ups and downs of market volatility – meaning you don’t panic or make hasty decisions when markets fall.
5. You understand that money is a means to an end
The problem with money is that it never feels like enough. Performing well financially isn’t just about accumulating dollar bills in a bank account. And it’s not about making more and more money to buy more and more things that you don’t really need.
It’s about knowing how much is enough to live the life you want, so that you still have time and energy for the things that really interest you – like spending time with your loved ones or pursuing a passion – instead of burning the oil from midnight.
Maybe you don’t feel rich. But if you’re doing well in these five areas, then you’re doing better than you know.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.