5 Signs Your Finances Are in Better Shape Than You Think

Sometimes, optimism is warranted.

As a writer and editor for The Ascent, I am deeply embedded in the personal finance space, and surrounded every day by smart people who are excellent with money. Sometimes I feel like an imposter -- I never used to make enough money to really plan much for the future. So, I started working with a financial planner earlier this year, and I've been working hard to get out of debt and get my finances in order. Ultimately, I'm hoping to start off 2023 with a clean slate, start an investment account of some kind, and save to buy a home in the not-too-distant future.

I'm definitely not the only person who's lost sleep worrying about money and how to get out of debt and get ahead. The American Psychological Association's Stress in America survey from earlier this year found that 65% of adults surveyed consider money to be a source of stress in their lives. The constant gloomy news about an impending recession (or indeed, something worse than a recession), along with higher costs due to inflation and supply chain issues, is definitely not helping. So with all this in mind, here are five ways to tell that your finances are in better shape than you think -- even if you're currently in debt.

1. You know how much you owe

The first thing to consider when you're working on paying off your debt is to know how much you owe. I know, I know, it can be scary to contemplate those numbers, and in the case of high-interest credit card debt, every month you carry a balance, you're getting more debt added on top of your existing debt. It's like the world's worst hot fudge, on top of the world's worst sundae. But if you've been keeping track of your debts, or have recently decided to take a deep breath, sign into those online accounts, and actually see, in black and white, how much you owe, that's a great sign of things to come for you.

2. You have easy access to your debt amounts

Knowledge is power, and the easier it is to keep the knowledge of your balances at the top of your mind, the easier it will be to pay them off. So if you know what you owe, have you taken those numbers and made them accessible? It's a pain to have to sign into credit card accounts every time you want to check your balances, so I recommend plugging them into a spreadsheet or, if you're spreadsheet-challenged (as I am), just put them into a document where you'll have easy access to them.

3. All your accounts are in good standing

So, you might know how much money you owe your creditors, and that's a great start. But are all of your accounts with them in good standing? Do you owe payments that you haven't made yet? Have your creditors sent your outstanding debt to a collection agency (that generally doesn't happen until you are at least three months behind on a payment)? If you can say that all your accounts are up to date, and all payments owed have been made (even if all you could pay was the minimum amount due), you're treading water on your debt, and could be in a good spot to be able to pay it off with some hustling, budgeting, and planning.

4. You can increase your income or cut your spending

Okay, this is a big sign you're better off than you realize. Can you increase your income (perhaps by getting a side gig, qualifying for a raise at work, or even changing jobs/careers together)? If not, can you find some places to cut your spending? Maybe you order a lot of takeout (no shame! Although I will point out that you can do it less often, and also do it smarter, and save money). Maybe you have an expensive hobby. If you're trying to get out of debt, and can also up your income or tighten up your excess spending (ideally both, if you're seriously committed to getting to a better spot financially), you're well on your way to success.

5. You have a plan to pay off your debt

Finally, the last way to tell you're doing better with money than you realize is if you actually have a plan to get out of debt. The two common ways to pay off debt are the debt snowball and debt avalanche methods. I've been snowballing my debt, and it was indeed very motivating to watch the smaller balances disappear first. I probably would have saved some money on interest had I gone with the debt avalanche technique, but ultimately, the best way to pay off your debt is the way that will keep you motivated to keep working hard, saving money, and making those payments.

If these five signs apply to you (or even if just a few of them do), congratulations! You're in the right frame of mind to get your financial house in order, and I'm proud of you.