Thanks to inflation and the cost-of-living crisis, it is becoming increasingly difficult to be financially stable in America. However, you’re often better off than you think, and here are 19 ways you’re outperforming the average American financially.
You can afford to save
According to Forbes, 78% of Americans live paycheck to paycheck. There is little disposable income for savings and many Americans have next to nothing put aside for a rainy day. Being able to consistently save a percentage of your income puts you well above the national average.
You have planned for retirement
With retirement so far in the future, a lot of Americans put off saving for it. When budgets are tight, it becomes the lowest priority. However, contributing regularly to retirement accounts like 401(k)s or IRAs is essential for securing your future finances. If you have the ability to consistently put money into these plans, you’re doing great.
Investment knowledge
Investing is not taught in schools; you have to actively seek out the information. Almost half of Americans say they don’t know where to start when it comes to building wealth, so if you have investment knowledge and understand how to manage your investment portfolio, you’re on the right track.
You own a home
It’s more difficult than ever to get on the property ladder, and most Americans now have no option but to rent. If you own your home, whether outright or with a mortgage, you’re doing better than two-thirds of Americans. New research has found that the majority of aspiring homebuyers are struggling to save the down payment.
You have an emergency fund
To manage the cost of unexpected expenses, an emergency fund is critical. It’s recommended that an emergency fund that covers at least 3-6 months of living expenses is a great safety blanket. However, Fortune says that the average American couldn’t cover a $1000 emergency.
Excellent credit score
Your credit score can be an indicator of how well you manage finances. Although it is a number based on credit payments, maintaining an excellent credit score shows that you know how to manage debt responsibly and can afford to make repayments.
You often budget
Budgeting is often thought to be for the poor but it doesn’t matter how high your income gets, you should always budget. A budget tells your money where to go instead of wondering where it went. Regularly creating and sticking to a detailed budget highlights you know how to manage your finances.
You live below your means
Living below your means is essential if you want to save, invest, and build wealth. However, most Americans live paycheck to paycheck and cannot afford to live below their means because expenses are too high. Spending less than you earn and avoiding lifestyle inflation is smart financial management.
You have financial literacy
Financial literacy is self-taught, and continuously educating yourself about personal finance, investing, and wealth management is key to doing well financially. The World Economic Forum says that half of US adults lack financial literacy, so if you understand what you’re doing with money, you’re doing well.
You have a side income
Earning additional income through side jobs, freelancing, or passive income sources is a great help to finances. Diversifying your income is incredibly financially savvy. If you lose one income stream, you always have another to fall back on. The biggest financial speakers advise having as many as seven income streams.
You’re frugal
A lot of people associate being frugal with being poor, but it’s always important to be frugal with your finances. Practicing frugal living habits doesn’t have to compromise the quality of life. It shows that you’re smart enough to shop around and not make poor financial decisions.
Minimum or no debt
The American population has a huge debt crisis so having little to no high-interest debt shows you’re outperforming most Americans. Money.com says that the average American has $22,713 worth of consumer debt, not including mortgages. If you have no debt or less than this, you’re doing much better financially.
You shop smart
People who are smart with their finances know how to take advantage of sales discounts and use coupons to save on purchases. The practice of smart shopping shows that you are willing to wait until you find the perfect deal rather than making impulse purchases.
Your assets are insured
It’s financially responsible to have adequate health, life, auto, and home insurance to protect against unforeseen events. You can also get income protection insurance to cover you in the unfortunate event of ending up out of work due to illness or injury.
You have a property portfolio
Property is one of the best investment routes you can choose, so if you have already started your property portfolio, you’re ahead of the average American. Real estate typically appreciates in value, making it a great long-term investment. Plus, you can also earn rent that will top up your monthly income.
Your finances are secured
Having a will, trust, or other estate planning documents in place to protect your assets and beneficiaries is crucial to your finances. It ensures that in the event of your death, your wealth is passed on with minimal stress. This is a great way to secure your future finances for your family.
You understand tax-efficiency
Utilizing tax-advantaged accounts and deductions to minimize tax liabilities shows that you know how to manage your money. It’s crucial to pay accurate contributions to the IRS but savvy to limit this liability. If you are tax-efficient and know how to play the game legally, you’ll outperform others.
You donate to charity
Donating a portion of your income to charitable causes is a privilege the average American doesn’t have. Most Americans don’t have the luxury of excess disposable income to donate to charities. Charitable giving can also provide tax benefits that you can only receive if you’re doing well with your finances.
You have financial goals
When it comes to finances, many Americans just go with the flow and hope for the best. Setting and achieving both short-term and long-term financial goals ensures a secure financial future without compromising your current quality of life. Financial goals give your money a direction.
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