Financial maturity is something everyone should develop as they go along in life. It takes good habits, discipline, and significant experience to attain it, but it’s a kind of wisdom that will make living a lot easier.
Here are five signs of financial maturity you should strive to achieve:
You always have an emergency fund
Specifically, you have enough money to get you by for at least six months. After all, you can lose your main source of income. You can get laid off, your business may go bankrupt, or you may face a medical emergency that prevents you from working. But if you have at least six times your monthly income in the bank, you can weather those storms.
Such an amount should be enough until you can find a way to earn a regular income again. For this reason, building an emergency fund is one of the most basic things financial advisers will tell you.
You always pay off bad debt
Debts can either be good or bad. Good debts are those you use to earn more money, which can both pay down the debt and continue earning even after you have paid off the debt. An example is a business loan from instant money lenders. If you use it to start a thriving enterprise, you can use some of the revenue to pay down your loan. With that, you do not have to use your own money for loan repayment.
Bad debt, however, does not earn you anything. More than that, you lose even more money because of interest payments. Personal loans, payday loans, and credit cards are examples of this.
If you always make sure to pay off bad debt as soon and as much as possible, you are on the way to financial maturity. Interest payments can continuously drain your money, so you will save a lot once you are debt-free.
You prioritise saving over spending
This principle is called “paying yourself first.” Each time you receive your paycheque, putting money in your savings account is the first thing you do. Only then will you spend the rest of your income on bills, utilities, food, and other expenses.
As your savings grow, so does your ability to fund your dreams. You can have money for travel, hobbies, or starting a business without having to take out a loan.
You regularly invest a portion of your income
Investing is a great way to build wealth over time. Financially mature people make investing a habit, regularly putting in a portion of their money on stocks, bonds, real estate, and businesses.
Be like them, because the more you invest, the more you will get in return. Even while you’re not working, your investments will earn.
You prefer purchasing assets over liabilities
Part of financial maturity is being wise with your purchases, particularly with big-ticket items like vehicles and properties. If you’re financially mature, you will only buy these things if you are sure these are assets, which are things that provide more monetary value over time. If you purchase a house, for example, and you decide to lease it out, it becomes an asset. You will earn consistently from rent
The same goes for a vehicle. If you buy a car to help you run your business, it becomes a money-earning tool.
But if you buy a car (or anything) just to show off, it becomes a liability. Liabilities cost you money over time instead of allowing you to earn more money. In this case, the cost of the car loan, insurance, taxes, petrol, and maintenance will wear down your budget.
Conclusion
If you are financially mature, you are wise in every decision you make that involves money. You use as much of it as possible to build wealth and provide for your own and your family’s needs, including any emergencies that may arise. In short, being financially mature means doing your best to have as little money worries as possible.