🌻15 Signs You’ll Be Financially Free in the Next 5 Years

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Financial education is a fundamental pillar of grown-up economics. Despite the internet being there for all of our finance-related questions, having a firm grip on our finances, it’s still classified as a Herculean task in some cases.

If you haven’t achieved full financial literacy yet, don’t worry. Tackle each of these signs with a clear action plan and, over time, you’ll increase your money savvy.

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In today’s article, we’ll take a look at 15 interesting ways you can identify a financially educated individual, and of course, how you can become one yourself. Sound good? Let’s jump right into it, shall we?

Read also: 5 small descions that will improve your life on auto pilot

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1. You Always Work With a Budget

Ahh… budget! That word stops you from spending more even when you really want to. Having a budget is a strong sign of financial discipline, it means that you’ve created a concise and specific way you want to spend your money.

Now, having a budget typically reflects your needs rather than your wants, but if you earn more than enough, allocating a few dollars for that item you’ve always wanted shouldn’t be that big of a deal.

Anyway, the point of a budget is to help you make sure you spend your money on the right things. Your budget must include your basic needs such as housing bills, groceries, transportation, and all that. However, a budget is only effective when you stick to it.

“I mean, come on, what’s the point of making a budget if you know you’re just gonna blow your money on useless crap anyway?”

A budget is important, but having the discipline to stick to it is even more important. It’s also pretty vital to prepare for price increases in your budget because we all know they happen quite regularly.

2. You Have an Emergency Funds Account

Have you ever heard anyone say you’re one emergency away from going bankrupt?

Now, while this might sound like a bit of a stretch, but it could actually be your reality if you haven’t gotten an emergency fund account. Emergencies are unpredictable. There might suddenly be a need for thousands of dollars one day, and if this happens, what’s your next course of action?

“Withdraw everything you’ve saved up for your kid’s college fund?”

“Dip into your family’s savings?”

Whatever you choose to do, there’s only one thing we’re certain of. You’re probably going to regret it in a few months, but with an emergency fund account, you don’t really have to worry because that’s the entire point of the account — to keep you afloat during emergencies.

This fund could be used to pay for high hospital bills or sustain your family if you lose your job.

3. You Understand Diversification

We’ve mentioned that financially educated individuals are always looking to invest, but you know what increases their chances of a bigger payout — “diversification”.

Now, diversification teaches that you don’t invest all of your money in one particular niche, instead diversify by putting your money in different types of industries and investments. Usually, this lowers the risk of losing your money while also increasing your chances of success.

Basically, diversification is a modern way of saying —

“Don’t put all your eggs in one basket!”

Read also: Want massive success? Avoid these two trap

4. You Know About Your Taxes and You Never Overpay

It can be overwhelming to try and understand your tax information, but considering the fact that it’s one of the highest expenses in every household, it’s only right that we dedicate enough time to understanding it.

In fact, understanding your tax information can be a smart way to minimize it in the long run. Also, you just might be paying more taxes than you need to. There could be a mistake buried somewhere and only a proper review from your end will expose it.

If you think you don’t have the experience or knowledge to understand your taxes, that’s totally fine. You can employ the services of an accountant who will help you to see where you can cut back.

Eventually, minimizing the taxes you pay in the long run.

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5. You Have a Separate Savings Account

Financially educated individuals know there is a difference between an emergency fund account, insurance, and a savings account.

Typically a savings account contains —

College funds.
Funds for family needs.
Perhaps money for a new home.
Having a savings account shows that you’re planning for the future meaning you wouldn’t be at the mercy of loan sharks when you need the money.

Also, having a savings account shows a certain level of discipline as it shows that you don’t have to spend every single dime you earn.

If you’re struggling with saving money every month, how about just starting with a tiny percentage of your income? It could be as little as 2%, 3%, 5%, or as bold as 10% to 20%.

Whatever percentage you choose, make sure it’s something that won’t affect your basic needs and something you can contribute on a consistent basis.

6. You Pay Your Debts on Time

While growing up, you might have been fed the sentiment that it sucks to have debt, but it doesn’t really. In fact, having debt is kind of necessary when you want to buy a house or a car.

Do you want to know what actually sucks?

Not paying your debts on time or entirely missing your payments.

Financially educated individuals understand that handling debts responsibly increases their chances of getting another and has a direct effect on their credit score.

Repaying debts should always be a priority for you and including it in your budget each month sounds like a great start.

Read also: 7 ways wealthy people make money (copy this)

7. You Invest Wisely

Have you ever explored the possibility of your money earning more money for you?

Sounds like a steal, right?

Well, that’s exactly what investment can do for you. If you want to earn more money on the side without necessarily putting in more hours, then you should consider investing.

Here’s the great thing about investment opportunities: There are several options available and you can find investment plans that go for as little as $100, but knowing how to invest and what to invest in is where the real work begins.

While stocks and bonds are the most popular options today, they might not be the right fit for you, and even if they are, you have to be sure that you’re investing in the right companies.

Before you commit to any investment plan, be sure to learn everything there is to know about it, and you could also hire a professional financial advisor to help guide you.

Also, we’ve come up with an article that can help you gain more insight about money and how you’re wasting it without even realizing it. Make sure to give it a read.

15 Ways You’re Wasting Money (Without Realizing) — And How To Stop It

15 Little-Known Things You Waste Money On — And How To Stop It

8. You Set Financial Goals

Why are goals important? Well, for starters, they give us long-term visions to help us organize our time, skills, and resources in such a way that will bring positive results.

It’s the same with setting financial goals — they help us to see the small and big picture and they determine what we will need to do to get to that point.

Do you want a new home?

Well, what steps do you have to take to make that possible — a new job, a savings account, or a loan? Having a long and short-term financial goal helps you to make more informed financial decisions and it eventually guides you to financial freedom.

9. You’ve Got Insurance

Having an emergency fund account is great and having insurance is basically like taking that a step further.

Insurance is some sort of safety net for you and your family — they’re supposed to help you bounce right back after something bad happens. This could be a tragic accident, a death of a loved one, a robbery, or even a fire. Whatever the misfortune is, you can rest assured that there is insurance to help you cover it.

Now, we understand that most people are put off by the endless paperwork that comes with insurance policies, but this process is important for the company as it helps them to determine what you’re entitled to.

Having insurance isn’t a luxury but a necessity for every person and family, and of course, a sign that this person has got their finances under control.

10. You Always Think of The Future

Financially educated individuals are always fixated on the future and they create a financial structure that reflects the sentiment.

Nobody wants to be stranded in the future due to poor financial decisions. So, the right time to act is “now”.

Always thinking of the future also prevents situations from taking you by surprise. It’s quite logical that if you plan ahead for something, you’re better suited to handle it when the time eventually comes.

11. You Stay Up to Date With Finance News That Concerns You

Being financially responsible also means that you have to stay updated with finance news that concerns you. This is even more important when you have an investment portfolio.

Having the right knowledge will help you to determine the next step and it will also affect your financial decisions.

Let’s imagine that a financial analyst predicts an astronomical increase in the price of goods and services. Well, seeing that this affects you directly, wouldn’t it be a good idea to decide to invest in real estate? This is because real estate does relatively well during surges of inflation.

Now, that’s just one example. You’re bound to discover more profitable financial tips when you stay updated and conduct extensive research on your own.

12. You Are Disciplined With Money

Whether we admitted or not, being disciplined with money is a core sign of financially educated individuals.

Being disciplined means you’re never wasteful with your money. You follow your budget closely and you never miss your debt payments. Discipline with money also suggests that you don’t buy things on impulse nor do you pay for items that you don’t really need.

13. You Have a Mental Knowledge of Your Net Worth

We mostly use the words “net worth” in connection with celebrities, but knowing your net worth as an individual is equally as important.

Basically, your net worth is the total value of every asset you own.

However, to arrive at a fixed figure you have to minus your deaths and the cost of your liabilities. Your assets include everything — your cash at hand in your bank accounts and everything else you can exchange for cash.

It typically consists of —

Your real estate
The money in your retirement fund
Savings or checking accounts
Cars
Stocks
Bonds
Business assets
And so on…

Your liabilities on the other hand include your debts and loans. There are tons of tools available online that can help you to calculate your net worth, and knowing this figure is important in knowing how healthy your finances are.

Knowing your net worth can also suggest where you can make immediate changes to improve your financial position.

14. You Don’t Replace Things That Aren’t Broken

Most people want to use the newest phone and car, but financially educated individuals know that there’s no point in replacing their gadgets if they aren’t broken.

Come to think of it —

“Why do you think you need the latest washing machine when your current one is working just fine?”

When you choose to keep replacing things that aren’t broken, you’ve not only saved a good amount of money but you’ve also prevented yourself from making a poor financial decision.

15. You Know How to Have Fun Without Breaking the Bank

When do you think of fun — what immediately comes to your mind?

Does it involve a large party filled with beer and pizza or maybe a hangout with your friends at the beach? Having fun doesn’t have to break the bank. You can have a ton of fun on a minimal budget too.

Did any of these reflect your stance toward your finances? Well, this means you’re doing something right, and if nothing did, well, it’s a good time to start making some better financial decisions.

If you article the article up until this point, awesome, we’ve got a bonus to thank you for it.

Read also: 7 rules to get anything in life (Simply powerful)

16. You Know Your Credit Score

Knowing your credit score is important for so many reasons, but it’s mostly needed to help you determine your financial health.

In fact, lenders use your credit score to ascertain if you qualify for a loan or not. So, if you’ve always ignored how important this is, now is a good time to change that.

CONTRIBUTED BY Alux

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