Hi friends!
I recently came across an article by the NYTimes discussing money dysmorphia, which is when your belief of your financial situation does not line up with reality. On one hand, you may be doing just fine financially (and the numbers look OK) but you believe you don’t have enough money. It’s really easy to compare ourselves to other people’s (financial) lives and doubt if we’re doing “enough.”
With all the noise out there, I’m here to ground you and remind you that you’re doing better than you realize. These are 5 signs you are doing well financially (and are great goals to aspire for):
1. You have $1,000 (or more) saved up
Almost 60% of Americans aren’t able to cover a $1,000 emergency expense. If you have some funds saved up, you’re doing better than the average American and you should be proud of yourself!
This is also a great first financial goal to strive for. It’s so important to build up a savings cushion because it protects you, provides you peace of mind, and helps you reach your life goals. Beyond your first $1,000, I’d suggest saving up 3 to 6 months worth of expenses in a high-yield savings account like this one. This gives you even more breathing room in case of a job loss where you have the funds to still pay your bills in the time being.
2. You have a plan to tackle your debt
It is pretty normal to have some sort of debt, whether if it’s from student loans, car loans, or credit card debt. The key here is creating a plan to tackle it, which shows dedication and consistency to reach your goals!
There are two main methods for debt payoff:
Snowball method: prioritize paying the smallest debt amount first and work your way up (works better for intrinsic motivation)
Avalanche method: prioritize paying off the highest interest debt first (most financially efficient)
3. You live within your means
This one’s important, but not a lot of people talk about it! I also mentioned this in my last post about “recession-proofing” your life (check it out if you missed it). Essentially, this means you’re spending less than your income and not going into consumer debt in order to “keep up with the Joneses,” you’re taking care of your future self, and investing in your goals.
When you’re starting out in your working life, this might mean you’ll make some short-term sacrifices (like getting roommates or cooking more). But, I’m always a big advocate of increasing your income so you can aim for the quality of life you want. This can come from raises at your job, learning high-value skills, or starting a side hustle. Increasing your income is usually easier than trying to cut out every discretionary expense out of your life.
4. You know your numbers
Financial awareness is huge! Tracking your income and expenses helps you see your overall financial picture and makes you more aware of your spending habits. I’m a big proponent of this–I’ve routinely tracked my income, expenses, and net worth for around 3 years now. It’s helped me reach some big financial milestones over the years, and it can definitely do the same for you.
5. You’re investing for the future
Saving is great, but you can’t save your way to wealth. This is where investing your money comes in, which helps you build long-term wealth. Start investing early, no matter how small. Time is your greatest asset when you’re young and small bits now will compound years down the road.
If you’re a beginner to the concept of investing, check out this video where I break down the basics!
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That’s it from me today! Let me know if you do any of these or if you have any goals you’re working towards :-)
xx,
Lillian
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