Recent statistics have revealed that only 40% of people have enough money saved to cover a $400 emergency. Credit card debt, student loan debt, and auto loan delinquencies each reached all-time highs in the last year. Despite an economy that’s doing well, along with extremely low unemployment rates, people are still living paycheck to paycheck, struggling to make ends meet. Not surprisingly, few schools are teaching any kind of financial literacy at all to prepare students for their financial future.
What these statistics should make abundantly clear is that even when things are good, people struggle with debt. If you can achieve financial maturity, you can ride any wave, weather any financial storm, and make wise financial decisions that can put you on track to achieving financial security.
What Is Financial Maturity?
Being financially mature shouldn’t be confused with financial independence or security. Financial independence, which most people strive for, is having enough assets and making enough money to support you and your family without working. With financial security, you may still have to work, but you’re confident that you’ll remain stable in your current financial situation, no matter what happens with the economy.
Financial maturity, on the other hand, means that you’ve taken the necessary steps or have acquired the traits that’ll lead you into financial “adulthood,” allowing you to live a more financially secure or independent life.
How to Reach Financial Maturity
People who’ve achieved financial maturity share similar traits. Here are four easy ways you can work to follow in their footsteps.
1. Achieve Financial Literacy
Educate yourself about personal finances. Start with the basics of your own finances, such as your debt, savings, cash flow, budget, and expenses. Don’t stop there, though. It’s important to understand how you and your finances act and react in the current financial conditions of the country. Learn what’s going on with the job market, current lending trends, cost of living, stock market health, and current interest rates for savings, mortgages, credit cards, etc. What’s projected to happen over the next five years? Do you work in a growing field or a dying one? How will changes that are positive and negative affect your current financial situation?
2.Develop Financial Preparedness
There are two parts to being financially prepared. First, build your wealth. Be mature by dedicating a portion of your earnings to things that’ll make you more secure.
- An emergency fund: Your goal should be to have six months’ worth of income set aside in an emergency account in case you become sick, injured, or lose your job.
- Retirement savings: People are living longer, on average. Start early with saving for retirement, so you have enough money to live comfortably in your golden years.
- Insurance: Having adequate insurance coverage on your home, auto, and life will protect you and your loved ones if something happens.
- Assets: Investing in assets such as investment accounts and real estate will provide security and diversification if you experience financial difficulties.
The second part to financial preparedness is what will help you attain the first: your lifestyle, specifically, what it costs to live the lifestyle you want to live. If it’s too costly, it’ll eat away at the assets you’ve attained.
3.Learn Financial Discipline
Discipline is what you need to use your financial knowledge to attain and follow through with your financial preparations. Financial discipline is what you need to keep it going. This self-control will prevent you from irresponsible spending. It also helps you cement good financial behaviors.
4.Develop a Financial Mindset
Having the right financial mindset is where those cemented financial behaviors come into play. Saving for retirement, having an emergency fund, and making good financial choices aren’t temporary whims. These are long term and should be part of your mindset. The decisions you make are ones that’ll keep you moving along the path to financial security.
Your credit score is partially calculated by your ability to borrow money and make payments on time. Without that history, creditors are sure to be apprehensive about giving you a loan. Maintaining a good credit score will not only allow you to secure loans if you need them, but it’ll also allow you to get the best interest rates available.
Financial Maturity: The Key to Your Future
The average Social Security payment as of January 2019 was $1,461 a month. The maximum possible in 2019 is $2,861, but this is only attained after earning at least $132,900 per year for 35 years. For most people, retirement doesn’t mean Piña Coladas on sandy beaches. It means part-time jobs and wondering how you’re going to heat your home next winter. If you aim for financial maturity at a young age, you’ll have money saved so you won’t have to rely upon Social Security alone when you retire.
Being financially mature has many added benefits. It keeps you looking forward, planning for the future. As you mature, you’ll meet goals along the way. Succeeding at your goals helps you remain disciplined. It also shows you the importance of setting realistic, attainable goals.
Last but not least, it gives you a healthy view of money. If you’re consistent, you won’t have to obsess over where your money is coming from, now or in the future.