Everybody loves money, but let’s face it: not everyone is good with money. Many people spend more than they earn, save very little, and a surprising amount of people aren’t prepared for an emergency or retirement.
On the other hand, there are the financial rockstars. They know how to rock a budget and a savings plan, squash debt (or never get into debt in the first place), and they’re in control of their money. Here’s how you know you’re rocking your finances and making the most of your cash:
1. You Know “Budget” Isn’t a Bad Word
Financial rockstars have a budget and abide by it. They don’t find it constricting. It’s just second nature for them.
As budget lovers, they spend less than they earn, track spending, and are prepared to pay for all expenses — after they pay themselves by contributing to savings and investments first.
2. You Don’t YOLO Your Money Away
Financial rockstars know how to have a good time in the present, but know that it’s just as important to plan for the future through a sound retirement plan. They don’t put all their eggs in one basket and are likely to contribute to both a 401K and a Roth IRA — which gives them a diversified source of future financial security.
True financial rockstars also work hard to either max out their retirement accounts or contribute as large of a percentage of their incomes as possible. They don’t settle for saving 10% of gross income. They’re aiming for 20%, 30%, and more.
3. Your Favorite Number Is Your Credit Score
Age may be nothing but a number, but financial rockstars know the numbers do matter when it comes to credit scores. Your credit score can affect your ability to own a home, get a car loan, secure a job, and more.
Financial rockstars regularly check their credit score and make sure there are no funny errors that sneak up on them. They also practice smart habits with credit usage: they always pay on time and in full and keep their debt-to-credit limit ratio low. (They might even brag about their number, because they know having good credit offers them more opportunities.)
4. You Automate to Achieve Financial Goals
Financial rockstars like to work, but when it comes to money, automation is key. They automate their savings into targeted savings accounts in order to reach their goals, their retirement contributions are set up like clockwork, and bills are all set to be paid on time.
They know that automation is best because it means getting out of your own way. No more forgetting to contribute to savings; no more being tempted to spend that money instead of putting it away into an investment account.
5. You Have a Flush Emergency Fund
Not only do financial rockstars have emergency funds that will help them cover unexpected expenses, they’re constantly adding to them and building up a bigger buffer. They work to have a year’s worth of expenses in an interest accruing savings account and they never, ever touch it.
Having this fund earmarked for emergencies allows financial rockstars to sleep better at night and focus on other financial goals. They know when things hit the fan, they’ll be financially covered.
6. You’ve Never Had Debt (Or You Know How to Use It to Your Advantage)
Debt is a terrible 4-letter word that most likely has never been part of the financial rockstar’s vocabulary — at least when it comes to consumer debt from sources like credit cards. They steered clear of things they couldn’t afford.
In the few instances that financial rockstars have debt, it was likely taken on to gain access to an appreciating asset: think things like higher education (which might have meant taking out student loans) or buying a reasonably priced and sized home (which meant getting a mortgage).
They also have a financially-savvy plan for paying down this debt.
7. You Know All Investments Come with Risk
While everyone is freaking out about the stock market, financial rockstars stay cool as cucumbers. Why? They know long-term gains are far more fruitful than short-term losses. The rockstars are in this for the long-haul with a 30- or 40-year plan.
Risk is part of the investing game.
8. You Know Frugality Is About Mindful Spending (And It’s Not the Same as Being Cheap)
Financial rockstars are careful with money. They don’t get a rush from shopping or spending, and they value experiences and relationships over stuff — so they may not have a lot of things (and certainly not the latest and greatest of everything).
But they’re not cheap. They simply align their spending with their values and eliminate other expenses that they don’t prioritize. It’s all about mindfulness and spending money where it matters.
9. You Protect Yourself and Your Assets
Health insurance? Check. Disability insurance? Check. Life insurance? Check. Homeowners insurance? Check.
Financial rockstars cover their bases when it comes to protecting their assets (and that includes themselves!). Things happen, and they prepare for the worst.
It’s not pessimism: it’s making sure nothing happens to the assets they’ve worked so hard to accumulate. That’s why they research plans and coverage, compare rates, and make sure whatever life throws their way won’t wipe out their financial security.
10. You Know How to Save — and How to Make Money
While it’s important to cut back and live on less, rockstars also focus their energy on making more money. They know the combination of prioritizing spending so they can save and earning more is the way to fast-track financial goals.
Financial rockstars work various gigs on the side. They negotiate for better pay at new jobs (and negotiate for raises in current positions). They don’t settle for work that’s unfilling and low-paying, and aren’t afraid to seek out new opportunities.
Are you a financial rockstar? Which of these habits do you already practice — and which do you need to take action on?