What Does Being ‘Good with Money’ Actually Look Like?

People tend to talk about being financially savvy in a black and white way. You’re either good with money or you’re not.

But as with most things related to your finances, it’s a little more complicated than that. You could be great at earning money and terrible at saving it – or vice versa. You could have an impressive net worth and a terrible credit score. You could be the world’s greatest budgeter and the world’s worst investor.

In other words, being “good with money” can mean a lot of things. Let’s take a look at some of the most important factors to consider.

Metrics to Track

While there’s not a single figure that shows you’re good with money, there are some numbers you can track to see how you’re doing (Mint tracks these for you):

Net Worth

Your net worth is your total assets minus your liabilities. Assets include the money in your bank accounts, investment accounts, collectible items, home equity and more. Liabilities include what you owe, like your credit card balance, auto loans, student loans, mortgage balance and more.

To calculate your net worth, add up your assets and liabilities separately. Then, subtract the liabilities from the assets. Don’t be surprised if your net worth is negative. That means you owe more money than you currently have. Recent graduates and young adults often have a negative net worth, especially if they have a lot of student loans.

But as you get older, your net worth should increase as you pay down debt and start investing consistently. Try to track your net worth a couple times a year. You can create your own spreadsheet or use Mint’s net worth tracker.

“Over time you will see your assets really starting to grow,” said Ryan C. Phillips, CFA, CFP, and founder of GuidePoint Financial Planning. “The success from this can be really motivating and many times will lead individuals to save and invest even more.”

Credit Score

Your credit score shows how responsible you are as a borrower. Potential lenders, utility companies, cell phone providers, car insurance companies and landlords will look at your credit score before approving you.

A credit score doesn’t take your savings rate or investment success into account, so it’s not a holistic number. But it does show if you’re good at borrowing money and paying it back. Even if you plan to avoid taking out loans, you may still need a good credit score.

Meeting Your Personal Goals

Being good with money doesn’t mean reaching the same financial goals that everyone else aspires to. For example, many believe that owning a home is necessary for financial success, but if you move around frequently for work, buying a house each time may actually negatively impact your finances. In this example, renting may be a better use of your funds.

“Money is simply a tool that you can use to reach your personal goals and live a simpler, happier and less stressful life,” said financial planner Kyle Simmons of Simmons Investment Management LLC.

Make a list of your goals, like becoming self-employed, traveling abroad once a year or switching to part-time work. Then, figure out how your finances can help you achieve those goals.

Monitoring Your Expenses

Even if you don’t follow a strict budget, looking at your transactions at least every month is wise. You’ll only notice fraudulent purchases, mistakes and surprise expenses if you actually read through your statements regularly.

Ideally, you should know how much you spend on major categories like housing, transportation, groceries, insurance and entertainment. You should also be aware of how much you’re saving and if that savings rate corresponds to your goals.

How to Get Good With Money

Want to be better with finances? Here are a few places to start:

Start a budget

Creating and following a budget is one of the first steps to becoming better with your finances. By creating a budget, you can reduce your spending and increase your savings. You can start saving for long-term goals like retirement or short-term goals like starting your own business.

Use Mint to examine your current expenses and see where you can cut back to pay off debt and save more. Mint will notify you when you’re close to exceeding your budget and when you’re close to reaching your goals.

Don’t be afraid to invest

Paying off debt and saving money are fairly straightforward tasks for many consumers. If you want to pay off debt faster, just add more money to your monthly payment.

But investing is more complicated, so many consumers avoid tackling it. Unfortunately, if you don’t invest, you’ll likely never save enough to be able to completely retire. Learning how investing works and what options are available is a non-negotiable aspect of being good with money.

Be willing to learn

The world of personal finance is vast and ever-changing. Investing in cryptocurrency was unheard of for most people just a few years ago, and now it’s common practice. Before the 2018 tax law, homeowners often itemized their tax deductions. Now most consumers take the standard deduction.

Stay up to date with personal finance news by following personal finance influencers, perusing financial publications like Kiplinger’s Personal Finance and reading the latest money bestsellers.

If you want more personal advice, consider hiring a fee-only financial planner. You can find a trustworthy planner through the Garrett Planning Network, the XY Planning Network and the National Association of Personal Financial Advisors.

Becoming Good with Money Takes Time

Because most schools don’t teach personal finance and many parents don’t discuss money with their kids, it’s no wonder that most of us leave home without the financial skills needed to build a secure future. “I think too many people say that they are or aren’t good at money like it’s a natural skill, but it’s really something that can be worked on,” said financial planner Thomas Kopelman of AllStreet Wealth.

Becoming more educated about personal finance is like learning a new language. You wouldn’t shame yourself for not speaking French fluently after just a few classes, so don’t shame yourself for not knowing the difference between a personal loan and a payday loan when you’ve never been taught.