7 Signs You're Doing Well Financially (for your age)...Even If It Doesn't Feel Like It
Summary
TLDRIn this financial advice video, John highlights seven signs indicating financial health, such as having an emergency fund of at least $11,000, making timely bill payments, earning passive income, investing in stocks, maintaining a good credit score, having minimal credit card debt, and feeling secure with a retirement account. He emphasizes the importance of these financial habits for long-term wealth and offers practical tips for viewers to improve their financial standing.
Takeaways
- 💰 Having an emergency fund of at least $11,000 puts you ahead of 50% of Americans and is a solid financial baseline.
- 📅 Making bill payments on time every month is a sign of financial health, as it indicates you're not experiencing anxiety or delays in meeting financial obligations.
- 💡 Passive income, such as interest from savings or dividends from stocks, is a sign of good financial habits and can accumulate over time.
- 🏦 Investing in the stock market, even with a small amount, positions you within the 58% of Americans who participate in wealth-building opportunities.
- 🔒 A credit score above average or at least average indicates financial responsibility and can lead to better loan terms.
- 🚫 Minimal or no credit card debt is a strong indicator of financial stability, as high-interest debt can be a significant financial burden.
- 💳 Utilizing a 0% interest balance transfer card can help pay off debt without incurring additional interest charges.
- 💼 Having the financial security to be unafraid of job loss, known as the 'rule of four', means having enough investments to cover your expenses for a significant period.
- 📊 A retirement account, whether an IRA or employer-sponsored, is a step above the 46% of American households without any retirement savings.
- 📈 Investing in low-cost, broad-based market index funds is recommended for long-term wealth accumulation and financial security.
Q & A
What is the first sign that indicates you are doing well financially according to the video?
-The first sign is having an emergency fund set aside of at least $11,000, which covers unexpected expenses and places you ahead of over 50% of Americans.
What is the recommended baseline for an emergency fund as suggested by John?
-John suggests that the baseline for an emergency fund should be at least 3 to 6 months of your expenses to provide a financial cushion in case of job loss or other emergencies.
How does making bill payments on time every month reflect on your financial health?
-Making bill payments on time every month indicates that you are doing well financially, as it shows you are not experiencing anxiety around bill due dates and are not falling into late payment traps, which affects about 60% of Americans.
What is the significance of having passive income in your financial portfolio?
-Passive income, such as interest from a bank account or dividends from stocks, is significant as it provides a steady income stream without active work, contributing to your overall financial stability.
What does it mean to have 'skin in the game' in the context of the stock market?
-Having 'skin in the game' in the stock market means that you are invested in stocks, which is important for wealth accumulation over time, as opposed to not participating in the stock market at all.
What percentage of Americans hold any stocks, and why is this significant?
-Only about 58% of Americans hold any stocks, which is significant because it indicates that 40% of the population is not participating in the potential wealth growth offered by the stock market.
What is the recommended strategy for investing in the stock market for long-term wealth accumulation?
-The recommended strategy is to invest in low-cost, broad-based market index funds, which have historically provided the most wealth accumulation for the average American over the long term.
What is the average credit score range for younger individuals, and what does it indicate about their financial health?
-For younger individuals, an average credit score range is between 680 to 690. A score in this range indicates that they are financially responsible and likely paying their bills on time.
Why is having a credit score above 800 considered to be well above average?
-Having a credit score above 800 is considered well above average because the average credit score for different age groups ranges from the low 680s to the mid-700s, and reaching 800 is quite an achievement.
What is the 'rule of four' mentioned in the video, and how does it relate to financial security?
-The 'rule of four' is a method to calculate the amount of money needed to be invested in a low-cost, broad-based market index fund to achieve financial security. It is calculated by dividing your annual projected expenses by 0.04, indicating the amount needed to tell your manager to 'pound sand' without financial worry.
What percentage of American households reported having any type of retirement account in 2022, and why is this a concern?
-In 2022, only 46% of American households reported having any type of retirement account. This is a concern because it indicates that a significant portion of the population may not have adequate savings for their retirement.
What are the two approaches to pay down credit card debt mentioned in the video?
-The two approaches to pay down credit card debt mentioned are the debt snowball effect, where you pay off the smallest amount first to build momentum, and the debt avalanche approach, where you tackle the credit card with the highest interest rate first.
What is the significance of having a 0% interest balance transfer card when paying off credit card debt?
-A 0% interest balance transfer card is significant when paying off credit card debt because it allows you to transfer the debt to a card with no interest for a promotional period, often up to 21 months, enabling you to pay off the debt without incurring additional interest charges.
Outlines
💰 Emergency Fund Significance
The video script starts with the host, John, addressing a common concern about feeling financially behind. He introduces seven signs that indicate one is doing well financially. The first sign is having an emergency fund of at least $11,000 set aside, which is more than 50% of Americans. He suggests aiming for 3 to 6 months of expenses in an emergency fund and advises saving a portion of each paycheck into a high yield savings account to build this financial buffer.
📅 Punctual Bill Payments
John continues by discussing the second sign of financial health: making bill payments on time every month. He points out that many Americans experience anxiety around bill due dates and often pay late. By consistently paying bills on time, one is in a better financial position than a significant portion of the population. For those struggling with timely payments, John recommends reviewing the budget, cutting unnecessary subscriptions, and adjusting bill due dates to manage finances more effectively.
💸 Passive Income Streams
The third sign of financial well-being is having passive income sources, such as interest from savings accounts or dividends from stocks. John clarifies that passive income doesn't refer to get-rich-quick schemes but to legitimate sources like dividends from holding stocks or interest from a high yield savings account. He emphasizes the importance of not just having a savings account but one that offers a significant interest rate, contributing to passive income without active work.
🏦 Stock Market Investment
John highlights that investing in the stock market is a key indicator of financial health, with only 58% of Americans currently invested in stocks. He stresses the importance of long-term investment in the market, particularly in low-cost, broad-based market index funds, as a strategy for wealth accumulation. He also recommends opening a brokerage account with minimal to no fees and suggests starting with index funds like VTI or VOO for a diversified investment approach.
🔑 Credit Score Indicator
The fifth sign of financial stability discussed is having a credit score that is average or slightly above, which indicates financial responsibility and timely bill payments. John explains that a good credit score can lead to better interest rates on loans, saving significant amounts over the life of a loan. He provides average credit score ranges for different age groups and offers advice for improving credit, such as paying bills on time, keeping credit utilization low, and considering secured credit cards or becoming an authorized user on a family member's account.
💳 Minimal Credit Card Debt
John identifies having minimal or no credit card debt as the sixth sign of financial health. He differentiates between good debt, like mortgages that lead to asset accumulation, and bad debt, such as high-interest credit card debt that compounds over time. He suggests strategies for paying down debt, including the debt snowball and debt avalanche methods, and mentions the use of 0% interest balance transfer cards to help manage and eliminate debt.
💼 Financial Independence
The final sign of financial well-being that John presents is the ability to feel secure in one's job situation, even to the point of being able to walk away without financial repercussions. He introduces the 'rule of four,' which involves having 25 times one's annual expenses invested in a low-cost, broad-based market index fund. This amount provides the freedom to leave a job without concern for immediate financial stability. He also touches on the importance of having a retirement account, noting that only 46% of American households have one, and encourages viewers to strive for more than just being 'fine' by calculating their 'F number' or 'FU number' using the rule of four.
Mindmap
Keywords
💡Emergency Fund
💡Bill Payments
💡Passive Income
💡Stock Market Investment
💡Credit Score
💡Debt Management
💡Retirement Account
💡Financial Buffer
💡High Yield Savings Account
💡Credit Utilization
💡Authorized User
Highlights
Having an emergency fund of at least $11,000 places you ahead of 50% of Americans.
Maintaining a 3 to 6 months' expenses in an emergency fund is recommended for financial security.
Paying bills on time every month is a sign of financial health, with 60% of Americans experiencing anxiety around bill due dates.
Cutting down on unnecessary subscriptions can help manage bills and reduce financial stress.
Having passive income from interest on savings or dividends from stocks is a sign of financial success.
A high-yield savings account offering 4% to 5% interest is a simple way to generate passive income.
Investing in the stock market, with 58% of Americans not participating, is crucial for wealth accumulation.
Long-term investment in low-cost market index funds is recommended for wealth building.
A credit score of 690 or above for younger individuals is considered average or slightly above, indicating financial responsibility.
Paying bills on time and keeping credit utilization low are key to maintaining a good credit score.
Having minimal or no credit card debt is a strong indicator of financial health, as high-interest debt can be a financial anchor.
The debt snowball and debt avalanche methods are effective strategies for paying off credit card debt.
Utilizing a 0% interest balance transfer card can help eliminate debt without incurring additional interest.
Having a retirement account, even if it's just the minimum, is better than the 46% of Americans with no retirement savings.
The 'rule of four' is a method to calculate the amount needed in a retirement fund for financial independence.
Having financial stability to the point of not fearing job loss indicates a strong financial position.
Only 46% of American households have a retirement account, making it a significant achievement to have one.
Transcripts
so you see it online you feel it when
you talk to friends and family it's as
if every single person is just so much
further ahead in life than you are but
I'm here to tell you about seven signs
that you are actually doing well
financially even if it doesn't feel like
it and if you're new around here hi I'm
John of John's Finance tips and this is
the channel we dedicate to talking all
things money making saving investing and
today's money topic we're going to be
talking about is how you are actually in
a better position with your money than
you might think number one you have an
emergency fund set aside of at least
$11,000 now this one might seem trivial
but just by having money to cover things
like a random car breakdown or any other
miscellaneous expense that comes out of
nowhere you're already doing better than
50% of Americans because as this stat
would say over 50% of Americans don't
have $11,000 set aside to cover any sort
of unexpected emergency and personally I
would say the $11,000 in an emergency
fund should be a baseline if you really
want to strive to achieve and succeed
you want to have at least 3 to 6 months
of your expenses in that emergency fund
so instead of a car breakdown mechanical
issue let's say God forbid you lost your
job you would still have a bit of a
financial cushion as you look for your
next opportunity and for those of you
that might not yet be in a situation
where you have $1,000 set aside my
advice every single time you get your
paycheck put a little bit off into a
high yield savings account get into the
habit of saving some money aside so that
you have some Financial buffer for any
unforeseen circumstances the second sign
that you're doing well financially even
if it doesn't feel like it this one I'm
going to ask for some audience
participation now put your hands up if
every single month you have bills due
okay now keep your hands in the air if
when that due date comes around your
palms get a little bit sweaty and you
get a little bit anxious or keep them up
if you ever think to yourself all right
just one more late payment but next
month I'm good and I'll catch up now for
those that put their hands down you can
be assured that this is a sign that you
are doing well financially and that is
making your bill payments on time every
single month because according to a
study by ACI worldwide and Visa six out
of 10 Americans have anxiety when Bill
Dates come around and nearly half have
paid them late and I know there are some
of you sitting in the audience that are
thinking it should be automatic the due
date comes and you pay your bills on
time and in full however for some folks
that's certainly not the case they're
stretched in financially so if you are
able to make those payments on time
every single month you're doing well as
for those who might be struggling here
are some things that you might look to
first thing have an idea of what your
total budget is and see if you can cut
down on some of the junk bills and fees
there are things like subscriptions that
you might not be needing or you might
not be using but you're just leaving it
on there or you haven't got around to
canceling it ask those ASAP especially
if you're late on any overall bills in
addition what might help is try to shift
your due dates around for things like
credit card bills that you're not
getting hit with random bills throughout
the month and you try to consolidate
everything into week one or week two
instead everything is Consolidated into
a specific period of the month and you
can take care of all your finances then
sign number three you have passive
income I know you heard me say passive
income and immediately what comes to
head is this 20-some year old YouTuber
making $20,000 in his sleep yeah no I'm
not talking about that type of passive
income and also that type of passive
income doesn't actually exist they're
making their money on the back end of
courses and selling this and that sorry
I don't want to get distracted now let's
talk about you you and your passive
income because most of you do have
passive income and if you don't it's
literally as easy as a click of a button
and the specific type of passive income
that I'm talking about comes from either
the interest from a bank account or the
interest from your stocks yes and I'm
not talking about a stock appreciating
but dividends because by holding certain
stocks every quarter every year they
will pay a dividend and yes that truly
is a passive stream of income now it
might not be a lot but $10 here $20
there that could eventually add up on
the flip side to that folks you're
shooting yourself in the foot if you
don't already have a free high yield
savings account this is literally a
savings account you put money into and
you get sometimes 4% sometimes upwards
of 5% interest that right there is
passive income you go to sleep you wake
up there's more money in there than it
was the day before and you did nothing
and if you don't already have a top high
yield savings account then I recommend a
you can either check out this video or
I'm going to have a link description
down below of some of my top high yield
savings counts for 2024 sign number four
you have invested at least
$100 almost on the daily it feels like
clockwork that we see on the news the
S&P 500 is this the Dow Jones Industrial
is blah Apple Tesla Google reporting on
XY Z yada yada yada but it turns out
that only about 58% of Americans hold
any stocks that means 40% of the
population has no skin in the game
whatsoever in the stock market and if
you want to talk about true wealth
making the stock market is where you
need to be so if you're in the camp of
58% of Americans who do hold stock
you're doing very well for yourself
because over time if we take a look at
the S&P 500 which are the 500 largest
companies currently in the US that Trend
tends to go up into the right now the
key to being successful in the stock
market is actually doing very very
little so if you've got skin the game
already and you're able to at least hold
on to that investment for 10 15 30 plus
years you will be in a very very very
good financial situation I highly highly
recommend after you have an emergency
fund set up after you've got all of your
other bills paid off to at least try to
find a way to dedicate some amount of
money to put into the stock market
because trust me when I look at true
wealth acceleration for the everyday
American it's having skin in the game in
the market and to do that what I would
recommend recommend is open up a brokage
account it doesn't matter where you open
one up I personally use Charles Schwab
I've also used public.com I've also used
Vanguard but really it's whatever flavor
that you want to pick just make sure
there's very little fees Associated
actually no make sure there's no fees
Associated to opening that brokerage
account and then once you have that
brokerage account set up what you want
to invest in especially if you're in
your 20s or 30s lowc cost market index
funds do not go and try to find the next
Tesla or Apple that to me is a little
bit like gambling the shortest thing for
the most Americans to make the most
amount of money in the stock market over
the longest period of time is buying a
lowcost broad-based market index fund
that does this over time I personally
just buy vti which is literally trying
to track the entire stock market other
people like vo which just tracks the S&P
500 but it doesn't really matter which
you pick as long as again you get skin
in the game the fifth sign that you're
doing well financially even if it
doesn't feel like it you have a credit
score that's at average or slightly
above and the average you're saying
depending on age group but the Younger
You skew would be about a FICO score of
over 690 growing up I used to think a
credit score of under 800 was bad which
meant I also used to think that getting
a good credit score was next to
Impossible I mean how many people do we
really know that have 800 plus credit
scores however it turns out for the
average American if you skew on the
younger side let's see gen Z or so
you're in that 680 690 that's an average
Tre score for those who are a little bit
older maybe Millennial Gen X you're in
the low 700 709 to like 720 730 and both
these numbers are just looking at the
average credit score which means 800 is
by no means average that is well well
well well above average now you have a
credit score that's that strong kudos to
you however if your credit score is just
at the average or slightly above or just
slightly below you're doing perfectly
fine financially because by having a
solid credit score it's a couple of
indicators the first is it tells lenders
that you're financially responsible what
that would then mean is when you go get
an auto loan or a home loan you get
better interest rates getting lower
interest rates could literally save you
hundreds of thousands of dollars over
the time Horizon of that loan especially
if I'm thinking about mortgages right
now with rates over 7% if you can knock
that down as low as possible that's big
savings the second thing a credit score
indicator tells me is that you're paying
your bills on time and so by way of
having a decent credit score you're
already well financially because
remember the second thing we talked
about was being able to pay your bills
on time however for the folks out there
who might not be at the average who are
still working to on their credit here
are some things you want to do that
might help boost your credit the first
thing if you can the most important
thing get your bill paid on time do not
ever ever miss a credit card due date
technically you do have a bit of a
buffer but I would say let's error on
the side of caution and pay our bills on
time the second thing if you can pay it
in full or at least as much as you can
to keep your credit utilization down
because that accounts for 30% of your
credit score next if you're really new
or you're really trying to build cigit
you're having a hard time look to get a
secured credit card or a student credit
card typically these have really no
credit score requirements and so pretty
much anyone can open them now the goal
to getting a secured credit card and a
student credit card isn't so then you
can start go and spend flashy
willy-nilly no no the goal of those
cards is to get the card to build your
credit to learn how to use the card and
then you can graduate to talking about
other higher cards with a little bit
more of the bells and whistles if you
can and you have a family member who has
good credit see if they might be willing
to add you as an authorized user so you
can inherit some of that and get a
little bit of a boost as you start
picking yourself up working towards
having Better Credit yourself the sixth
sign that you're doing well financially
you have a minimum amount of credit card
debt now I'm not talking about the
what's do on your credit card bill every
month but I'm talking about people who
might be having 5 10 20,000 of credit
card debt that's just kind of been
following them if you have a minimal
amount or ideally none of that you are
doing very well financially because in
the world world of debt there is such a
thing in my opinion as good debt and bad
debt good debt leads to more assets bad
debt just leads to more debt for example
good debt mortgage that's totally fine
you qualify for a loan you're paying
into a property you're gaining Equity
it's appreciating great bad debt credit
card debt you've had $5,000 of credit
card debt uring at a charge of 20%
interest every single year you're making
M payments it will be very very
difficult for you to claw out of that
and all that's going to do is be a
financial anchor that's dragging you
down every single year and according to
TransUnion the average consumer credit
card debt right now is around $6,000 so
if you're below that ideally as close to
zero as possible you're doing very well
financially now a pro tip for folks who
are in some form of credit card debt
there's two approaches you can take to
trying to pay down the debt one is known
as the debt snowball effect that is
where you take a look at all of your
outstanding credit card debt and you pay
off the smallest amount first the
thought is you pay the smallest amount
off on that account you build momentum
you work on to the next one the next one
the next one and you kind of snowball
until you get to that big one and you
pay it all off the other approach you
can take is called the debt Avalanche
approach where you look for the credit
card that has the highest interest rate
because that's charging you the most you
tackle that first and you go on to the
next highest interest rate account and
so on and so forth until you fully
Managed IT in addition I would say if
you're doing either of those approaches
consider also looking at a 0% interest
balance transfer card so you take the
credit card debt you transfer it to a
credit card that has no interest but in
the time that the promotion runs which
can be anywhere from 12 upwards of even
21 months you pay that entire sucker off
so you're not having to pay interest all
along the way that's one method
certainly to layer on top of a debt
snowball or debt Avalanche approach in
the seventh sign that you're doing well
financially even if it doesn't feel like
it let me get a show of hands if any of
you have ever one day kind of had a
Daydream where your manager comes in
gives you an assignment and you just
look at them and tell them to pound sand
and when you say that you have complete
piece of mind knowing that if he were to
fire you on the spot you would be okay
but how would you know when that day
comes the day where you feel so
financially secure that you don't even
care whether or not you will be employed
tomorrow well you can't go by gut feeli
instead you have to use what I call the
rule of four and what that basically
entails is you taking your expected
expenses so let's say your expected
expenses every year are
$100,000 and then you divide that by
0.04 what that would get is a number 2.5
5 million and that's the amount of money
that you need to have invested in the
stock market in a lowcost broad-based
market index fund where you can
basically tell your manager to f off
that's also known as the retire early
track you know I know you're probably
thinking dude I thought we were talking
about being financially stable retire
early I know I know that might be a
dream way way way in the back of your
head however if you even have a
retirement account whether it's an IRA
or an employer sponsored account you're
doing just fine compared to the average
American because in 2022 only 46% of
American households reported having any
type of retirement account let's forget
about the early retirement but there's
46% of Americans that have nothing saved
for the day that they do eventually walk
from their job when they're 60
6570 that is just to me such a scary and
daunting thing so if you have a
retirement account set up you're doing
just fine but of course you can always
strive for more than fine by figuring
out what exactly your F number or Fu
number is by again using my rule of four
dividing your annual projected expenses
by 04 and that's the amount of money you
need to save into a low cost broad Bas
Mark Index Fund to one day pull the
trigger now folks these were the seven
signs that show that you're doing well
financially even if it might not feel
like it questions comments down below
what I may have missed other than that
I'll catch you on the next video peace
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Emergency funds
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