6 Signs You Are Smarter About Money Than You Were 5 Years Ago

The coronavirus pandemic of 2020 changed many things about the world, including how people look at and manage their money. According to a new GOBankingRates study, 74% of people said they were smarter about money since the pandemic began, a perhaps unexpected benefit of the global calamity.

If the survey results are truly representative, they mean it’s likely that you are also smarter about money than you were five years ago. Here are some of the signs that you’re doing the right things with your money and are moving towards a more prosperous financial life. 

Approximately 22% of Americans have no emergency funds at all and only 44% could pay a $1,000 expense with their savings, according to a 2024 Bankrate report. If you find that you have a sizable emergency fund, especially if you didn’t have one before the pandemic, it means you’re smarter about money now.

Most financial experts suggest having at least three to six months of expenses saved in an emergency fund or as much as one year if your income is erratic or inconsistent.

From April 2020 to December 2021, throughout the heart of the pandemic, the percentage of households carrying credit card balances actually fell from 50% to 45%. This was due in large part to the unprecedented stimulus programs that put money directly into the pockets of Americans during the pandemic.

Now that those stimulus payments are a thing of the past, debt levels have once again risen, to an all-time record of $1.13 trillion. If you’ve still managed to maintain your credit card debt at a low level — or have paid it off entirely — then it’s a great sign for your finances. 

One of the biggest financial transformations you can make is to move beyond living paycheck to paycheck. According to a 2023 survey by Payroll.org, 78% of Americans struggle to save or invest after paying their monthly bills, thereby living paycheck to paycheck. If you can manage to crawl out of this pattern, you’re definitely ahead of the game financially. 

Your 401(k) plan is one of the best ways to build up a significant nest egg over your working career. In addition to the tax breaks they offer, most 401(k) plans also benefit from employer matching contributions. The maximum 401(k) contribution is also a generous $23,000 for 2024, allowing those who can afford it to sock away a substantial amount on an annual basis.

If you could contribute $23,000 to your 401(k) for 30 years and earn an 8% return, for example — not even including the effects of an employer match or an annual increase in the contribution limit — you’d have a nest egg close to $2.8 million.

It’s hard to reach your financial goals without making a plan and seeing exactly where you’re headed. A budget can go a long way towards helping you out in this regard. By actively tracking your income and your expenses, you’ll see exactly where you need to make cuts to keep living within your means. Otherwise, your finances become something of a guessing game. When Americans had to hunker down and wait out job losses and other financial setbacks during the pandemic, some picked up the habit of budgeting to help make ends meet. If you’re continuing to do so, that’s a change for the better. 

When it comes to building long-term wealth, your annual net worth is an important yardstick. If it’s increasing every year, you’re likely doing smart things with your money. To calculate your net worth, first total the amount of all of your assets, from cash and retirement accounts to real estate, cars, bank accounts, personal property or anything else you have of value.

From that, subtract all of the money you owe — also called liabilities — such as credit card debts, personal loans, student loans, auto loans and your home mortgage. The resulting number is your net worth. If it’s improving every year, you’re on top of your money situation. 

Any forward progress you can make with your finances is helpful in terms of reaching your long-term financial goals. You don’t need all of the characteristics on this list to be a successful saver and investor, but each is an indication that you’re moving in the right direction.  

GOBankingRates surveyed 1,008 Americans aged 18 and older from across the country between March 26 and April 1, 2024, asking twenty different questions: (1) Has a lack of financial literacy caused you to struggle with your money?; (2) Which current money hot topic is most confusing to you?; (3) Which money expert do you trust most for teaching you the basics of money?; (4) Since the pandemic started in 2020, do you think you have become smarter about your money?; (5) What poor money habits did you learn during your childhood? (select all that apply); (6) What poor money habits did you develop in your early adult years? (select all that apply); (7) What poor money habits have had an impact on your marriage/partnership? (select all that apply); (8) What poor money habits do you worry about passing on to your kids? (select all that apply); (9) What aspect of buying a car do you find most challenging/confusing?; (10) What aspect of buying a house do you find most challenging/confusing?; (11) What aspect of paying off debt do you find most challenging/confusing?; (12) What concerns you most about planning for retirement?; (13) What best describes your feelings about investing?; (14) How much have you saved in the last year?; (15) How much debt have you acquired in the last year, not including mortgage debt?; (16) Do you currently bring in enough money to cover your bills?; (17) How much do you think about your financial status?; (18) What best describes your feelings about managing your money?; (19) What is your monthly car payment?; and (20) How much income do you think is needed for a middle-class family to live comfortably? GOBankingRates used PureSpectrum’s survey platform to conduct the poll.