7 Signs You're Doing Well Financially (for your age)...Even If It Doesn't Feel Like It

Summary

In 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

00:00

💰 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.

05:01

📅 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.

10:03

💸 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.

Keywords

💡Emergency Fund

An emergency fund is a financial safety net that consists of money set aside specifically to cover unexpected expenses or financial emergencies, such as a car breakdown or job loss. In the video, it is mentioned as a significant indicator of financial health, with having at least $11,000 set aside being a baseline for many, and ideally, 3 to 6 months of expenses should be in this fund.

💡Bill Payments

Making bill payments on time is a key aspect of financial responsibility. The video discusses how anxiety around bill due dates is common, but those who can confidently make their payments without delay are in a good financial position. This is a sign of effective money management and can also positively impact credit scores.

💡Passive Income

Passive income refers to earnings that are generated without the need for continuous active work. In the context of the video, it is exemplified by interest from savings accounts or dividends from stocks. The script emphasizes the importance of having such income streams as they contribute to financial stability without requiring additional effort.

💡Stock Market Investment

Investing in the stock market is highlighted as a pathway to wealth accumulation. The video points out that only 58% of Americans hold stocks, and those who do are in a better financial position. The speaker recommends investing in low-cost market index funds as a strategy for long-term financial growth.

💡Credit Score

A credit score is a numerical representation of an individual's creditworthiness and is used by lenders to assess the risk of lending money. The video explains that having a credit score above average indicates financial responsibility and can lead to better interest rates on loans, which is a sign of good financial health.

💡Debt Management

Debt management involves strategies to handle and pay off debts effectively. The video discusses the importance of minimizing credit card debt, which is considered bad debt, and suggests methods like the debt snowball and debt avalanche approaches to tackle debt repayment.

💡Retirement Account

A retirement account is a savings plan for long-term goals, such as retirement. The video notes that having a retirement account, like an IRA, is a sign of financial preparedness, as only 46% of American households have one. It's a way to ensure financial security in the future.

💡Financial Buffer

A financial buffer is a reserve of money that provides a cushion against unforeseen financial needs. The video script mentions it in the context of saving a portion of each paycheck into a high-yield savings account, which can be used for emergencies and contributes to overall financial stability.

💡High Yield Savings Account

A high yield savings account is a type of bank account that offers a higher interest rate than a traditional savings account. The video emphasizes the benefits of such accounts as a source of passive income, where money grows over time without active trading or management.

💡Credit Utilization

Credit utilization is the ratio of your credit card balances to their credit limits, and it is a significant factor in credit scoring. The video advises keeping this ratio low to maintain a good credit score, which is vital for financial health and obtaining favorable loan terms.

💡Authorized User

An authorized user on a credit card can benefit from the primary cardholder's good credit habits, which can help boost their own credit score. The video suggests this as a strategy for those looking to improve their credit, by inheriting some of the benefits of another person's responsible credit use.

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