A version of this piece was originally written for and published on Business Insider
I’m a financial planner, and I specialize in designing strategies for working professionals in their 30s and 40s
Most people are experiencing a lot of transitions and milestones at these ages, and almost every decision you make or goal you set has major financial implications. Doing the right financial planning at these critical stages can make the difference between being “just okay,” and building serious wealth.
After spending over 20 years in the financial planning industry, I’ve gotten pretty good at spotting the people most likely to be successful — even before we start working on their plan. There are certain signs and signals that tend to signal when someone is good with money.
What it means to be good with your money
Being good with money doesn’t mean you know everything and never make mistakes. It doesn’t mean you simply have a lot of it, either.
People who are really good with their finances are those who are motivated to learn and who get real satisfaction from seeing a plan in action. They’re coachable and interested in getting expert opinions; they value advice from people with more experience and wisdom.
Being good with money also means you are ready and willing to course-correct when you get distracted, and learn from mistakes when they happen.
The people who tend to make the absolute most of their financial resources seem to be those who have a genuine interest in strategically using them to build a great life — whatever a great life means to them.
When I get to interact with clients who are good with money, there tend to be some common signs.
You know the limits of your own knowledge and learn from past mistakes
The clients we work with are experts in their chosen fields. They’re excellent attorneys or cutting-edge scientists; they’re pioneers in tech and healthcare, or they’re highly successful entrepreneurs heading up unique and interesting businesses.
I’m lucky that I get to work with so many brilliant, high-achieving professionals — and the ones who are the best with their money are the ones who know finance is not their area of expertise.
Instead of convincing themselves they know everything, people who are good with money can identify where their knowledge stops. Doing so allows you to seek out experts who can fill in the gaps and provide guidance, so you can continue to excel and succeed.
Asking questions is an important part of that process, too. Seeking more information and data through questions helps you grow and learn.
So does confronting mistakes head-on, rather than ignoring them. Doing this provides you with an opportunity to see what went wrong. Once you understand that, you can avoid a similar error in the future and get to a better outcome next time.
You get your motivation from what you save, rather than what you spend
Our most-successful clients are those who have an active interest in saving and investing. They’re motivated by the opportunity to grow their assets, rather than finding chances to spend what they earn.
That’s not to say spending is bad, or if you enjoy spending you’re not good with money. It’s more about the order of operations, or priorities: folks who are good with money tend to save first, and then spend with what’s left over (rather than spending what they want, and then saving if they still have money available).
Another trend I tend to see among people who are great with money is that when they do spend, they’re thoughtful, mindful, and deliberate. They spend in a way that aligns with their values, and they usually favor experiences over material things — which is shown to increase happiness and satisfaction.
And while people who are good with money may have some good debt, they almost never have bad debt. “Good” debt comes from applying leverage to access an asset that could increase in value; think things like a home you own for decades but used a mortgage to buy, or a college education that will put you into a high-paying job but required student loans to afford.
Bad debt, on the other hand, is used to acquire things that only depreciate in value. Credit card debt and car loans are prime examples of bad debt that folks who are good with money rarely have.
You’re grounded in (your) reality
People who are great with money generally understand where they stand relative to their peers — but at the same time, they don’t get caught in the comparison trap.
The best way to explain this sign might be to look at it’s opposite. People who seem to struggle with money tend to compare what someone else has to what they have… and try to spend to catch up with a perceived lack.
People who aren’t great with their money also tend to be totally divorced from reality. They may say things like, “we don’t spend that much!” while spending over $10,000 per month.
If you want to be good with money, I find it helps to understand what the average person saves and spends (or at least, what the average household with a similar income level does). That gives you a baseline to use to see if you fall above or below it.
At the same time, you need to remember that’s just a line in the sand to give you some context about your own financial life. What matters most is focusing on your specific goals, needs, and priorities, and ensuring that your finances are aligned with what matters most to you.
Want more financial advice you can actually use? Beyond Your Hammock is a fee-only financial planning firm for motivated professionals who want to use their money as a tool to build wealth and enjoy life.