8 Signs You’re Probably Going To Be Okay Financially

There is a whole genre of videos or episodes or people out there that tell you exactly where you are and where you're supposed to be with your money by a certain age, by a savings rate, by a net worth, by emergency fund, all of it. And I know I've done some of it too. But if you don't hit those numbers, what? Congratulations, you get to spend the rest of the day feeling behind. Here's my problem with that. Those benchmarks were built for a person who doesn't actually exist, living a life that you probably don't want. So hitting their numbers doesn't tell you if you're okay. It tells you if you're average. And those aren't the same thing. This is Building Your Money Machine, where we help you master your money, eliminate financial stress, and live a life by choice. And I'm your host, Mel Abraham. And today I'm giving you 8 signs that tell you if you're actually on track for your life, not some stranger's. So let's do this. All right, let's get into it right away, because in the next 20 or so minutes, you're going to find out whether you're actually on track or just comfortably lost. See, I had two clients about two years apart in age with practically identical numbers, same savings rate, around 20 to 25%, same net worth, same debt, well-managed. They got it all dialed in. One of them was in great shape. The other wasn't. See, but not because of the math, primarily because of where they were trying to go. One wanted a quiet life in the mountains. The other wanted a second home and a month in Europe every year. Same numbers, two completely different verdicts. So before we get into the list, here's the only question that actually matters today. Okay, compared to what? Compared to what? That's the thing that we need to think about because most of the time they're comparing you to averages that you don't want to be a part of. So sign number 1 is you actually have a real number, not just some vibe. Most people think I'm okay financially means hitting some number, a million bucks, $2 million, whatever the number is and whatever sounds impressive at that freaking dinner party. But here's the problem with that. A number without a destination isn't a goal. It's a guess wearing a nice outfit. That's about it. And I should know because for years I was that guy who could tell you exactly what was in everyone else's bank account. And I had zero idea what my own finish line looked like. Numbers guy, no number. Figure that out. Kind of embarrassing when you say it out loud because here's where I realized that back in 2009, I was riding a mountain bike down a hill to the gym. I was angry, I was distracted. I just had a bad conversation with a girlfriend. And so I wasn't paying attention to anything, including my own shoelace, which decided that day was the day it wanted to introduce me to my bike chain. Okay? It got caught in the chain. I clipped the brake, the bike flipped. I went over the handlebars, landed on my head. Grade 4 concussion, no feeling on the right side. I couldn't speak right. I was stuttering for days. A couple of days later, one of my closest friends picked me up. I was in a neck brace, I was still recovering. He took me out to lunch and sitting there, still stuttering, still not all the way back, he looks at me and says, "How much is enough?" And I looked at him like he had lost his mind. I'm going, "Dude, I just got outta the hospital and you want to have a philosophy conversation right now?" But he wasn't joking. He said, "You got on that bike angry and distracted because you're running a race that you have no idea where the finish line is." It could be behind you, it could be ahead of you. You could literally be standing on it and you wouldn't even know it because you never defined it. And you wouldn't even recognize it when you get there. So you'll get back on the bike after you heal, you'll do this again, and the next time you might not get back up. And that hit harder than the pavement did. See, that conversation changed everything for me. Not because I needed a bigger number, but because I actually needed a real number. And here's the thing about that finish line. It actually has two paths. There's a floor and the number that means that, that the people you love are safe no matter what happens. And then there's the dream, the number that funds the life you actually picture when you close your eyes and you stop being responsible for 5 minutes and you dream. Most people have neither. They've got some vague feeling that more would be nice. They call that a plan. Remember those two clients from a minute ago? Same savings rate, same net worth. The difference wasn't the math. One of them had done this work, the other one hadn't. One had a real number, the other had a vibe with a spreadsheet attached. That's it. So sign number one is knowing what your number is. What's the floor? What's the dream? It's yours, not borrowed from someone else, not someone else's highlight reel, not someone on TikTok or Instagram. It doesn't matter. That's the thing. We gotta start there. What is your life? That leads to sign number 2, because that's a little more practical. It's about a question almost nobody asks about their own debt. Sign number 2 is your debt actually has a job. Here's a question almost that no one asks. What is your debt actually doing for you? We treat all debt like it's the same thing, like all debt is wearing different outfits. That's the kind of thing. See, some debt is an employee. Some debt is a houseguest that never leaves and keeps eating the snacks. If your debt is productive debt, meaning that it builds cash flow and it builds equity and it builds value, builds wealth, is growing your wealth over time, it has a job. A mortgage on a home that's building equity, a loan that helped you grow a business, the debt is on payroll and it keeps earning for you, then you keep it as you pay it off. But if the debt's financing lifestyle, vacations, electronics, dinners that you couldn't afford, it doesn't have a job. It's already spent the thing it bought. It's not building anything. And here's the part that should bug you. If it's not building anything, any interest on it is too much. I don't care if it's 0%, it's still too much because it's, it's taking from you because you're paying extra just to own less of your own future. And here's one more gut check on top of this. Add up everything going out the door every single month to debt, every loan, every card, every payment, and look at it against your income. If that number's creeping north of 35 or 40%, it doesn't matter how productive it is or you think it is, it's squeezing the air outta everything else you're trying to build. All right, so first things first, let's make sure that all debt has a plan. A job. Then you have sign number 3. That's where your investing is working without you having to think about it all. Sign number 3 is your investing is actually automated. You're not having to, to think about it. Here's the test: if you had to manually decide every single month to move money into your investments, would it actually happen? I think not, because for most people it won't. Even me. Not because they don't want to build wealth, but because life happens. The car needs brakes, the kids need cleats, and oh, I'll catch up next month, that kind of quietly becomes the permanent address for your investment. See, I'll give you a real one from my own house. My wife Stephanie, she bakes. And if there's a cake sitting out there on the counter, I will eat that cake, not because I decided to, but because it's right there, daring me, tempting me every single time I walk by. But if it's wrapped up and tucked into the back of the freezer, out of sight, Out of, out of mind, which means it's out of my mouth. Same cake, completely different outcome. All because what's automatic versus requires a decision. See, your investing works exactly the same way. If it depends on you remembering, deciding, or following through every single month, that cake's on the counter and you're probably gonna grab a piece. But automated investing isn't about willpower. It's about removing the decision and the friction so the money moves before you can even talk yourself out of it. So if you set it up, you generally don't think about it anymore. That means the money's coming from your paycheck, from your bank account to your investing account, and it is happening in the background. That is not laziness. That is strategy. That is the money machine doing its job. So sign number 3 is about your money moving without you. Sign number 4 is about whether you'd survive a curveball and not just survive it, but stay completely calm while it's happening. Sign number 4 is you have liquidity. Most people think an emergency fund is in case I lose my job. And that's true. I mean, I get it, but it's such a small slice of what it's actually there for. Here's how I break it down. 3 to 6 months of expenses is your emergency fund. That's your floor. That's the car died, the transmission went out, the roof is leaking, and I'm still fine. That's that money. But the number that actually changes your life is the next one. 9 to 18 months, which I call the peace of mind fund. And this is where I think it gets interesting because that fund isn't just insurance against disaster. It's also an opportunity fund. Money sitting in a high yield savings account isn't lazy money, even though it feels like, mm, just sitting there doing nothing like a teenager on a Saturday morning. That money's doing something. It's giving you options. It's giving you peace. It's protecting your wealth. As you do that, it gives you the ability to walk away from a job that's draining the life out. It's the ability to say no to a client who treats you like garbage. It's the ability to jump from an opportunity, a deal, and jump on something that makes sense and pivot because you actually have the cash to move while everyone else is still waiting for the next paycheck to clear. It's also the difference between I have to take this job because I need the paycheck and I get to choose this job because it's the right fit. That's not a small difference. That's basically the entire difference. That's liquidity. It's not money sitting still. It's a key to your own front door. Sign 4, that gives you options. Sign 5 though, it gives you a reference point. Just don't mistake it for the finish line. Sign 5 is you're tracking your net worth to income ratio. This one's simple. Are you tracking the investible net worth compared to your income? Not your house, not your car, the stuff that actually can work for you, the investments, the retirement accounts, the business equity, the stocks, those rental properties compared to what you're currently earning. Why does this matter? Because here's what's happening. As a general reference point, we want to have this dialed in. Fidelity, Fidelity did a study and they have a general guideline. And remember, I don't want to compare to averages, but at least it gives you something to evaluate against. And they say you should have at least 1 times your income by age 30, 3 times by age 40, 6 times by age 50, 8 times by age 60, and 10 times by age 67 in net worth. So, so those numbers are what your investable net worth should be. Now here's where I want you to pump the brakes because I think this is where people will misuse this number. This ratio is built around one goal, replacing your current income. And replacing your income and building the life you actually want are not always the same thing, but it's a starting point. And if you're not tracking it at all, then that's where you don't have a sign. But if you're at least tracking it, we know something and you're, you're moving forward on it that way. And so think about it this way. It's like using a treadmill to figure out if you're going on vacation. Sure. It tells you something, it tells you how far you've walked, but it doesn't tell you if you're anywhere near the beach. So we have to track it. Use it as a gut check, a starting point, something you glance at once or twice a year, but don't let the, "I hit the fidelity number," become the finish line because the finish line isn't a multiple of your old paycheck. It's the life you defined back in Sign 1. The benchmark gets you in the conversation. Your vision is what tells you whether you're actually winning and where you're actually going. All right, that's the halfway point. A real number, debt and a job, automated investing and liquidity, and the benchmark. Okay, but before we get back to the back half of this, I think it's important for us to figure out where you are, because some people say, I don't even know where my number is, what could my number be? Well, I got you something called the Freedom Number Calculator. It's totally free. It'll give you a ballpark. You're going to download it, we'll hook it up for you. It's melabraham.com/number. Download it, put some numbers in, it'll give you an idea of what that finish line might be like for you so you know where you're going. All right, sign number 6, your spending is prioritized on purpose. Remember those 2 clients from the start? Same numbers, completely different outcomes. Here's what the second one actually did. Once we found the gap, first they looked at where their money was going genuinely wasn't making 'em happier because we have money that goes out and some of it just isn't moving the needle for us. And they didn't sit back and say, oh, cut out the coffee. I mean, real stuff, whether it was subscriptions that they forgot about, a bigger car than they needed, the spending that had become automatic but wasn't really adding joy. That's the first thing that they did is to start to get out of those things, 'cause it's not about the $5, $7 lattes. Second, they looked for ways to create short-term income, side projects, extra hours, things that could front load a little extra into a plan so compounding could start start working sooner because let's face it, they wanted the, the month in Europe, but they didn't have the funding for the month in Europe yet. Okay. And third, the part that most people skipped is they went back to the vision itself and asked, what do they really truly want versus what they thought they were supposed to want? They landed somewhere in the middle between the bare minimum and the big dream, not because they compromised, but because they got clarity. And because the market did what the markets do over the last decade, they actually are doing better than the middle ground right Now that's sign 6. Spending with a purpose, with a priority towards a direction isn't about deprivation. It's about making sure your money is pointed to the life you actually want, not just the life you fell into. All right, sign number 7 is the one that I think, mm, this ties this whole thing together. And I think it changed things for me the day I met my wife. Sign 7 is you actually have a plan. Here's the thing. When you create a financial plan, most people get it wrong. They think a plan is something you build once, put in a drawer, and you're done. Set it, forget it. And I did that, check it off, and it's like a slow cooker. Except the slow cooker doesn't need you to come back in 5 years and tell it that you got married. A real plan is a document. It's a living, breathing thing. It gets built around the math. It gets tested against the stuff that could go wrong. And then life happens and it gets revisited. Revisited, not abandoned, revisited, redone. I had a plan for my life before I met Stephanie. I knew where I was going. I knew what I was building, what the destination looked like. I had it dialed in. It was my plan for my life by myself though. Then I met Stephanie and everything about the plan changed. Not because the math was wrong, but because the destination was wrong. I wasn't planning for one person's life anymore. I was planning for hours where we wanted to live, how we wanted to spend our time, what retirement meant for us. All of it rewritten because the life I was building for changed. It didn't stop there, though. See, years later, walking on the beach after my first granddaughter was born, it hit me. I said, there's potentially 80 more years of Abrahams on this planet after I'm gone. And how does that fit into the plan? Not just leave them some money, but how do we actually bring them into this? How do we build something that serves people who aren't even born yet? Every single time, the math didn't break. The destination though, it changed, and the math had to catch up. And this is why I made a plan 5 years ago means absolutely nothing on its own. The question isn't whether you made a plan or you have a plan, it's whether the plan you're running today still matches the life you actually want to live. The vision needs to get revisited every time. Stephanie and I revisit it every single year, but it also needs to get revisited every time life changes. Marriage, kids, grandkids, career pivot, a health scare, any of it. Not because you failed the first time, but because the first plan was built for a person who you used to be. And here's the real test for whether your plan is actually a plan. Has it been run forward? Have you done the math to see if at this pace you can actually get to where you say you're going? Has it been tested, stress tested against the stuff that could knock you sideways? The market, the stock market, a job loss, a market downturn, all of it. And does it get revisited on purpose when life changes? If, if you say yes to all of those, then you have a plan. If no, you have a really nice PDF that maybe made you feel good about yourself once. All right? But now we gotta get on it again. Now that leads me to the last sign, and this one actually is my favorite. Sign number 8, you have peace. And I genuinely think of this as the most important. Peace isn't a feeling you manufacture by hoping really hard. Peace comes from knowing exactly where you are, knowing exactly where you're going, and knowing the gap between those two things, and having actually seen a plan that closes that gap. It's okay that there's a gap, but do you have a plan and something you're executing on that you can see in time will close the gap? That's it. That's the whole thing. And notice peace isn't on this list because your balance sheet or your account has enough zeros to make an accountant cry happy tears. That's not the way this plays out. I've met people with 7 figures who are an absolute mess, lying awake trying to do the math in their own head at 2:00 AM. And I've met people with a fraction of that who sleep like babies because they know their number, they know their plan. They understand the gap and they understand the path to get there. Go back through everything we just kind of covered. I mean, a real number that is actually yours based on your life, making sure that your debt is got a job and is earning its keep. It's not some houseguest that's sitting on the couch. Investing that is running without you and that you have liquidity that's going to give you options. Now you have the benchmark to use as a compass, but not a destination. And everything drives a plan that gets revisited. Do those 8 things, even imperfectly, even if you're still working on a few of them. And here's what happens. You stop white-knuckling your finances. You start sleeping better. Your money stops being this looming thing in the back of your mind and starts being what it's always supposed to be, the paintbrush for the masterpiece called your life, and a life that you're actually trying to build. So if you're sitting there running through this list in your head thinking, okay, I've got some of these, but I'm missing a few. Good. That's not failure. That's just where you are right now. And right now is the only place you can actually start from. And here's what I want you to remember, because it's the thing that this whole episode is being built towards. Being okay financially was never about hitting some number that showed up in a magazine article or a journal or a benchmark that was built for someone else. It's about whether your money's actually pointed at your life, the one you actually want, not the one that you accidentally backed into or people expect from you. I think about that conversation at the pastrami place with my friend after my bike accident. He wasn't asking me a philosophy question. He was asking me The only question that actually mattered, how much is enough for you, for the life you're trying to build? Everything else, the savings rate, the debt, the automation, liquidity, all of it is just a vehicle. The destination is the part you have to define. So if this did anything for you today, then let it be this. Stop comparing yourself to the averages that are built by people who aren't you, living lives that you don't want. Define What your finish line is. Build the plan that gets you there and then go live like you actually know where you're going. Because earning more doesn't make you free, a money machine does. I hope that this hits. If this one hit home, do me a favor, man. Hit subscribe, gimme a thumbs up. And if you know someone that needs to hear this, send it their way. All right? If you have a question or a comment or anything, as always, reach out, drop it in, let me know. Love having conversations with you. All right, until I get a chance to see you in the next one, always, always strive to live a life that outlives you. See you in the next one. Cheers for now.