When you stop and analyze American spending habits today, you will realize just how important financial maturity really is. Looking at our current debt situation, you would never really think that we just went through an economic crash. Despite the devastating effects of the recession, it seems that we are back to where we were before. In some financial areas, you can see that the situation is much worse. Student loans have gone up drastically despite the tough job market. Auto loans are soaring higher than credit card debt.
While the increasing consumer spending is good news for some economists, it does not bode well of individual households. What is alarming about it is how the events of recent years are shaping the financial behavior of Millennials.
According to a recent study by the FINRA Investor Education Foundation, it is revealed that the youngest generation to enter into the workforce have low levels of literacy. Sure they are the most educated, but when it comes to money, a lot of them will fail. The study discussed on FINRA.org also mentioned that this generation worries about their debts but still display bad financial behaviors like borrowing from payday lenders.
Obviously, we need to strive for financial maturity because financial literacy is not getting us anywhere. Sometimes, we may know what to do but the implementation fails to follow through. If you cannot achieve maturity in your finances, then it will be very easy for you to go back to your old and destructive behaviors.
4 traits of financially mature individuals
Before you can hope to be financially mature, you need to understand what it is first. It is oftentimes confused with financial independence wherein you are in a financial state that you do not have to work anymore to support yourself. You either have set up one or several passive income sources that can pay for your monthly needs. That is financial independence.
Financial maturity is also confused with financial security. This is the feeling of confidence in your money situation - especially concerning your future. While this is part of being mature with your money, it is incomplete.
If you want to become financially mature, you want to have the following traits.
You are financially literate.
We have mentioned that this is not enough for any individual but it is an important part of being mature financially. You need to be educated, first and foremost, before you can hope to improve the condition of your finances. Planning for major financial decisions requires you to be educated so you can be wise about your choices. You want to know your options and how each of them will relate to your particular financial situation. This is the necessary first step for you to achieve financial maturity. And we are not just talking about knowing where your personal finances stand in terms of your statements, debts, savings, budget and expenses. You also have to know how it plays a role in the overall economic situation in the country. You should understand how the current economic conditions should influence your money decisions because it will eventually affect the economy in general.
You are financially prepared.
This involves two distinct preparations. One involves wealth building – both for your personal assets and your savings. The other involves your lifestyle and the expenses needed to support it. The first one, is quite obvious. Being mature means you are prepared to spend your money on things that will make your life comfortable. However, the expenses part can be quite confusing. Let us explain. You need to understand your finances because it will help you decide how you should spend your money. Even if you have acquired a lot of assets and your savings have grown, irresponsible spending can quickly eat up that fund. So to be completely prepared financially, you have to know how your accumulated wealth should be used. Which brings us to the next trait of financially mature individuals.
You have financial discipline.
Discipline is what will help you implement your financial education and whatever you have prepared. Even if you are financially literate and your savings and expenses are set up well, not having the discipline to follow through will render them useless. Any plans that you have set up to be financially prepared will have to be accompanied by discipline and self control. That way, you can help yourself follow them until you have reached your goals. This will allow you to shape the right behaviors when it comes to your finances.
You have the right financial mindset.
Lastly, to have financial maturity, you need to have the right mindset when it comes to money. Understand that money is just a tool that will help you reach your goals. It is not that end all and be all of your life. A lot of money will never define who you are. What is important is how you will use that money in your life. It should not be something that you will allow to rule over your life choices. The same is true with your perception of debt. You have to understand that debt, while it has the potential to be destructive, can also help you gain wealth. Some people got out of the recession being afraid of debt. This is one of the financial fears that you have to get rid of. When you have the right mindset about your finances, you can easily filter out the influences of society that usually lead to your financial demise. You get to make smarter decisions.
Early maturity with money will guarantee a secure retirement
Finding financial maturity is important because it will allow you to establish a good life for your future. Of course, we are referring to your retirement.
In an article published on USNews.com, it is revealed that the majority of seniors (84%) get their Social Security Benefits and use it to fund their retirement needs. It is an important foundation for their retirement fund. However, with the average benefit of less than $2,000 a month, it is not enough for any person to live comfortably. With the high cost of healthcare, it can hardly pay for the medical needs of the elderly. Only 30% of seniors have retirement savings and you can assume that those who does not have enough in their funds are forced to work during retirement.
If you do not want to end up like them, you should consider finding financial maturity at a young age. It is one of the strategies for a good retirement. You will get the following benefits for being financially mature.
It encourages you to always keep an eye on the future. That means your retirement will always be a part of your priority list – regardless of your age. You will set up a plan that will allow you to monitor what you intended for the future. Every decision will consult these plans so you will always be aligned.
It motivates you to reach your goals. As you keep your eye on the future, you get to use that as a motivation to succeed in reaching your goals. This success will help fuel the need to aim higher and improve your life even further.
It teaches you how to set realistic goals. Having goals are great but you also have to make sure they are realistic. It will keep you from having to deal with disappointment. Financial maturity will allow you to set realistic goals because of financial literacy. Remember that this is an important step to be considered mature with your money.
- It gives you the right perspective with money. Lastly, the benefit of having this maturity is it will tell you just where your finances start and end in your life. It allows you to reach your goals without being too obsessive about it. That way, you get to enjoy your life without being too engrossed with your goals.