When you’re financially mature, it’s easier to become more financially stable. You’ll also be able to maximize financial instruments like loans.
Of course, it can be difficult to gauge financial maturity on your own. You may feel like you’re ready to take on a loan online to fund your dream vacation, but are you really? Here are some signs that indicate your readiness to handle loans and other similar financial responsibilities:
You Have a Budget
Having a budget is a good sign of your capability in money management. In particular, if you know where every cent of your money goes, then you’ll likely be able to ensure that your loans will be paid in full and on time.
Do note that a budget is more than just a detailed list of what you earn, what you spend, and what you owe. You should also be able to make adjustments in case you encounter unexpected situations whether good or bad. In addition, being in the habit of reviewing your budget even if you feel like everything is going well is an indicator of financial maturity. This means that you’re being proactive in reducing your spending, saving money, and finding ways to supplement your income.
You Have Some Savings and an Emergency Fund
Before you even think about borrowing money, you should be prioritizing building your savings and your emergency fund. Note that these two should be treated separately from each other. Your savings should be dedicated for specific short- or long-term goals; meanwhile, your emergency fund should be for unforeseen events, like getting sick and needing to be hospitalized.
There are also some people who make a further allocation in their emergency fund for unexpected job loss. This way, they have something to fall back on while they’re unemployed and looking for another income source. You may want to consider this as well, once you’ve built up a reasonable amount for your savings and emergency fund.
You Use Your Credit Cards/s Wisely
Having a credit card or two gives you more financial freedom. The downside is that it can be easy to get carried away with your shopping.
A good sign of financial maturity is that you only use your credit card to buy or pay for things that you can afford with your own money. For example, you can enroll all your utility bills in your credit card’s auto-payment facility for convenience. This way, you’ll only monitor one due date and transfer funds only to one account.
Using your credit card wisely also means maximizing its rewards program. Check your card’s partnerships or special offers. Do you earn more points if you use the card when you gas up your vehicle? Do you get cashback if you purchase a certain amount of groceries? Getting the most of these benefits without overspending is a good sign of being financially mature.
You Don’t Shop ‘Til You Drop
There’s no two ways about it: shopping can be a lot of fun. This is even more true when you’re buying things that you love, such as clothes if you’re a fashionista or toy figures if you’re a collector. However, your enjoyment will soon turn into disappointment if you shop indiscriminately and realize that your bank account has been drained.
One of the best indicators of financial maturity is that you’re able to control your impulses when shopping. It doesn’t matter if you can afford what you’re buying—if you don’t need it, don’t buy it. If you still haven’t grasped this concept, then you may not be ready to handle a loan just yet.
You Set Financial Goals for Yourself
It’s hard to achieve financial maturity if you don’t set goals. They don’t need to be something grand, although it’s ideal if you have both short-term and long-term ones. Some examples of short-term financial goals include specifying a limit for miscellaneous expenses for the month, or increasing your savings by 20%. Meanwhile, long-term goals could be something like expanding your investment portfolio and setting up your retirement fund.
What these goals can do, alongside the aforementioned budget, is help you direct your money towards a purpose. This, in turn, can make you feel more motivated and accomplished. Ultimately, this will fuel your desire to be even more responsible because you can easily see and appreciate the product of your efforts.
Taking out a loan is a big responsibility, no matter if you’re borrowing a relatively small amount or a huge sum. This is why you need to be absolutely sure that you can handle all that a loan entail. If you aren’t and you still go with it, you can endanger your financial health.
What you have to understand is that financial maturity takes time to develop. You need to be patient with yourself. You’ll make mistakes along the way, but you’ll definitely be wiser about how you manage your money afterwards—provided that you learn from these mistakes, of course.
