How do you know when you are financially stable? There are subtle signs that determine if your overall financial health is in good standing.
If you've ever wondered, "What are the signs I am financially stable?" -- see if you can check off the following boxes that indicate financial stability.
You Have a Savings Account and an Emergency Fund
Financially stable individuals tend to have a few savings vehicles at their disposal. They have a traditional savings account and an emergency fund in the event of emergencies.
Saving from a fiscally healthy place means money isn't going toward a rainy day purchase. It's a savings for the future. Financially stable individuals consistently set money aside for saving toward retirement and meeting their future goals.
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You Pay Your Bills on Time
What credit card debt? A financially stable individual pays their bills on time each month. If there's a balance, like on a credit card, they pay it off in full.
Those in fiscally good health do not make it a habit to pay bills when they are past due, pay the minimum on their balances, max out credit cards to their limits or allow collection agencies to contact them for past due bills. Credit cards in particular are used by financially stable individuals for rewards rather than as dependency for any and all purchases.
You Have Flexibility
What does this mean? Zachary Barton -- CFP, financial planner and owner at Barton Financial Group -- said financial flexibility is the ability to handle the unexpected and quickly get back to your previous position of financial strength.
This means if there's suddenly a large, unexpected expense, a financially stable person will not beat themselves up over it. Instead, they will recognize they can recover quickly. Barton uses the example of suddenly finding out you must pay an expensive auto repair bill. While you have the appropriate insurance to protect you against liability claims, you need to pay out of pocket for repairs and must pay the mechanic using your credit card.
This is okay because you have flexibility. "You'll know if you are strong financially if by the end of 60 days you have been able to pay off the credit card and replenish your emergency fund," said Barton.
You View Debt as a Leverage Tool
There are two forms of debt. Bad debt is credit cards, medical loans and payday loans. This type of debt can be a drag on your finances and make you financially vulnerable. Good debt, however, is the kind of debt where monthly payments are reasonable. Think mortgages and car loans.
While debt is generally always considered to be bad, it can present powerful advantages to those who use it responsibly. Jamilah McCluney, financial advisor and strategist at Black Wealth Financial, said financial stability involves using debt as a tool for leverage and financial growth rather than using it to purchase things one can't afford.
People Turn to You for Financial Advice
If you find your friends often come to you for money advice, it usually indicates you are not only financially stable -- but financially responsible.
Your opinion may be more sought out because you are proven to set a good example when it comes to financial matters.
A Rocky Economy Doesn't Shake Your Confidence
The current financial economy is marked by a rising cost of living, soaring inflation and a turbulent stock market. While it's not surprising if anyone feels a bit panicked by the financial state of the world, those in solid fiscal health know they will be OK.
"One of the signs you're financially stable, particularly in this recent economy, is dips in the stock market, and potential recession, don't cause you to lose sleep at night," said Andrew Rosen, CFP and president of Diversified LLC.
"If you're financially stable, you're confident you can weather what the market may hold."
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