A lot is said about recognizing when you’re in financial trouble, with the idea being that you can fix your situation if you recognize early enough that you’re in trouble, but not much is written about how to know that you’re financially healthy or that your money woes are behind you.
Ironically, in order to know that you’ve put your financial problems behind you, you have to understand and recognize the signs when you were sailing into financial dire straits, so you can avoid them and “do the opposite.”
Overcoming financial difficulties is a bit like overcoming cancer — early detection gives you a better chance of a successful recovery. Having ignored, or not recognized, those signs, you found yourself trying to stay afloat in rough financial waters. Regardless of what you’ve done to reach safe harbour, you now want to enjoy the calm seas for a while, and preferably forever. So what are the signs that you’ve turned the corner?
The slush fund — that cash stash that will help you weather a financial storm is a must. Most analysts suggest having at least three-months’ worth of living expenses (rent, groceries, utilities, gas money … the essentials) in an emergency fund. Having this emergency fund means that even if a life-altering event were to happen (lose a job, have to take on heavy medical costs, relationship break-up, etc.), you could survive for three months during which you can enact a turnaround (find a new job, downsize your living arrangements, etc.). When you consistently start to see the balance in your savings account going up every month, instead of constantly being taken down to zero, you could be on your way to financial recovery. It may take some time to set aside that three-month slush fund, but every step forward means you’re on your way.
Credit card payments — once you start making more than the minimum monthly payment on your credit card, it means that you’re paying off your debt instead of just keeping your head above water. Many people don’t know that paying only the minimum on $1,000 costs you almost as much to finance that amount and takes you over a decade to pay off. It’s not cause to celebrate your financial independence just yet, but every journey of a thousand miles starts with a single step.
Sticking to a budget — it may seem like a simple thing, but a lot of people who get into financial difficulty don’t have a budget, and if they do, they don’t pay attention to it. They don’t always do it out of ignorance or apathy but in many cases they don’t even bother with a budget because they’re always in the red. Consciously drawing up a budget makes you realize you are in control of your spending, and then looking at your financial comings and goings on a regular basis will not only keep you on track but help you see how relatively easy it is to stay ahead of the game.
Finally, you’re answering the phone again — when things start going bad, creditors start calling; once they do, you find yourself ignoring phone calls or being selective about answering the phone. After all, creditors don’t usually leave messages and anybody from whom you want to receive calls will either leave a message or get hold of you some other way. And in this day of caller ID, it’s easy to see on the display if it’s a call you want to take or ignore. Once those bills are being paid regularly and you’re on the road to recovery, you’ll find yourself answering the phone a lot more often.