In the world of personal finance, mastering the art of money management is just as crucial as learning how to earn it. This article explores the signs that indicate whether a person is managing their money better than the average American.

From savings habits to investment strategies, we’ll delve into the key indicators of financial health and good money management. Read on to know where you stand.

Having A Strong Credit Score

A strong credit score, maintained by timely payments and responsible credit card use, is vital for financial success. It significantly influences your financial future as lenders use it to determine loan repayment ability, affecting terms and rates for mortgages, car loans, and other credit products. With the average American score being 680 for ages 18-26 and 690 for ages 27-42, a score above 690 indicates better financial standing than the average American in these age groups.

Having An Emergency Fund

Having an emergency fund covering at least six months of expenses is a key indicator of good financial health, yet according to Bloomberg, 2 in 3 Americans can’t cover a $400 emergency. If you have $2000 cash in your emergency fund, you are more financially secure than many Americans.

Having A Saving Plan

Setting aside funds for significant purchases such as a home or a car indicates that you’re forward-thinking and future-oriented. Everyone’s objectives and priorities differ, so it’s crucial to recognize what’s important to you and save accordingly. This is the right approach to financial planning.

Less Than $6000 in Credit Card Debt

If your credit card debt is less than $6000, you’re in a better position than the average American. With women and men averaging credit card balances of $6,232 and $6,357, respectively, and the national credit card debt standing at $1.03 trillion, maintaining a balance below $6000 suggests superior financial management.

Not Having Any High-Interest Debt

Debt with an interest rate of 8% or more is deemed high-interest debt. Individuals burdened with such debt are at a greater financial risk as these debts can rapidly escalate, leading to difficulties in meeting payment obligations.

Having $4,000 in Your Savings Account

Given the current economic conditions, saving money has become a challenging task. In fact, 57.4% of Americans have less than $1,000 readily available in their savings account. The average savings account balance per person stands at $3,123. So, if you have more than $4,000 in your savings account, you are doing better than most Americans.

Having A Debt Repayment Strategy

It’s essential to have a strategy for paying off debt. Letting your debt grow without making payments can lead to financial instability. Whether it involves budgeting or implementing a debt repayment method, having a plan demonstrates your proactive approach to managing your finances.

Having A Budget

Creating and sticking to a budget is a good indicator of financial health. A budget is a great tool to manage your income and expenses, preventing you from spending more than you earn.

According to an online survey, 84% of Americans with a monthly budget say they’ve sometimes exceeded their budget. If you maintain a budget and follow it consistently, you’re likely in a stronger financial position than many. Budgeting doesn’t have to be complex; the key is to find and stick to a system that suits you.

Not Dipping Into Your Savings Consistently

A common financial misstep is over-depositing into savings, only to frequently withdraw from it due to necessities, leading to an unstable savings account balance. This is not indicative of sound financial management. However, if you have a well-planned strategy and consistently allocate a reasonable amount to your savings, you’re already ahead of many in financial planning.

Maxing Out 401(K)

According to the US Bureau of Labor Statistics, 73% of civilian workers had access to retirement benefits in 2023, with 56% of workers participating in these plans. If you are a part of that 56% who save towards retirement every month, you are better than nearly half the US population.

Understanding how different retirement accounts work and how to maximize their benefits is a crucial part of retirement planning. Consider strategies such as maxing out contributions, leveraging company matches on a 401(k), and opening an IRA or Roth IRA to make financial contributions that can grow tax-free.

Paying Your Bills in Advance

Paying bills in advance with each paycheck, rather than using the next month’s salary, shows you have a successful spending strategy. Timely bill payments help avoid late fees and additional interest and maintain a good credit score. Set automatic payments for your credit card bills or reduce overall expenses to eliminate unnecessary bills.

Not Being Constantly Worried About Your Finances

You’re managing your finances effectively if you’re not constantly concerned about your financial situation and can afford occasional luxuries like dining out without stress. This peace of mind puts you ahead of many. It’s a sign of successful money management and financial stability.