5 Reasons You Might Be Better With Money Than You Realize
Just because you don’t have millions in the bank doesn’t mean you’re bad with money. In fact, your bank account isn’t the most accurate way to gauge your financial literacy.
See: Here’s How Much Money Experts Say You Should Have in Your Savings Account If You’re in Your 50s
Find: How To Build a Financial Plan From Zero
Recently, Bomikazi Zeka of the University of Canberra wrote in The Conversation that it’s a challenging time to achieve financial stability. “Every day, you’re making complex financial decisions (some of which carry huge ramifications) and there are more financial products and services available than ever before. Navigating this minefield can be overwhelming,” she writes.
According to Zeka, these are signs that you might be better with money than you think.
1. You Track Your Cashflow
Tracking your cashflow is important because it shows how much money is moving in and out of your bank account. This helps ensure you aren’t spending beyond your means and are making enough money to cover basic expenses.
Zeka said a sign that you’ve successfully managed your cashflow is when you have a surplus or buffer. This money can boost savings, pay off debt or meet other financial obligations.
2. You Stick to Your Budget
Setting a budget and following it requires a certain amount of financial discipline. A survey released last September by Opploans found that 73% of Americans don’t have a budget that they regularly follow — and 1 in 10 respondents said they don’t have a budget at all.
A solid budget can help reduce overspending and keep you on track to make better financial decisions.
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3. You Know the Difference Between Good Debt and Bad Debt
Just because you have debt — like a mortgage — doesn’t mean you’re bad with money.
Good debt is used to improve your long-term financial position or net worth, writes Zeka. On the other hand, bad debt doesn’t have lasting value and usually takes the form of payday loans or excessive credit card debt.
4. You Diversify
Don’t keep all your eggs in one basket.
Zeka sad it’s important to understand diversification and to spread your money across different places (savings accounts, real estate, stock market, etc.) to reduce your risk exposure. This can help you protect your wealth, especially in difficult economic times.
5. You Set Financial Goals
It’s easy to set a goal, but much more difficult to see it through. Zeka indicated that setting financial goals can involve either earnings, savings, investments, and debt management — or taking prudent steps to protect your wealth. When you set goals, make sure you understand what you are trying to achieve, why these goals are important and how you’ll achieve them.
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This article originally appeared on GOBankingRates.com: 5 Reasons You Might Be Better With Money Than You Realize
