As a personal finance consultant, Michela Allocca often hears from people who feel "very overwhelmed and defeated about their finances," even if they make a good salary.
Allocca gets it — managing money can be hard.
But a lot of people who feel helpless are probably doing better than they think they are, says the 28-year-old former financial analyst, who has a personal net worth of more than $500,000.
To help people feel "less hopeless," the author of "Break Your Budget" recently shared several signs you're doing better financially than you think you are on TikTok.
"I thought it would be a nice way to remind people that even if you feel like your finances are a disaster, you're probably doing better than a lot of people — you just don't realize it," she tells CNBC Make It.
Here are five signs that you're on track with your personal finances, according to Allocca.
1. You have an emergency fund
Considering that more than half of U.S. adults are unable to afford a $1,000 emergency expense, having a fully or nearly topped up emergency fund puts you ahead of most Americans, says Allocca.
Financial planners typically recommend a cash reserve worth three to six months of your expenses for unexpected emergencies, such as medical care or repairs to your car.
Allocca suggests putting the money in a high-yield savings account to maximize the interest you earn on those funds.
Building up an emergency fund can help you avoid relying on things such as high-interest credit card debt, which can be difficult to pay off. Getting into a cycle of debt can be unnecessarily self-defeating, Allocca says, since it "validates the story you tell yourself — that you suck with money."
But with "a little bit of money as a cushion, you could have covered it, moved on and worked toward your financial goals."
2. You pay your bills on time
If you consistently pay your bills on time, or even a few days early, it suggests you have a handle on your cash flow, says Allocca.
"A lot of people have no idea how much money they're actually spending every month," she says. This includes high earners who still live paycheck to paycheck because they aren't tracking their expenses.
By paying your bills on time, "that means you're not spending your last paycheck in its entirety before your next paycheck gets deposited," says Allocca. It's a sign that your monthly cash flow is better than you might think.
3. You can contribute to a financial goal every month
If you're actively taking steps to reach a financial goal, "you are doing better than most people," Allocca says in her TikTok post, whether that goal is putting money into retirement savings, paying down credit card debt or building up an emergency fund.
"Being able to save or invest or pay off any debt at all is an accomplishment," she says, even if the amount is small.
One goal Allocca encourages is for people in their 20s to start contributing to a tax-advantaged retirement account, such as a 401(k), to take advantage of compounding interest, which allows your money to grow exponentially over time. With compounding, interest accrues on both the initial amount you invest as well as the interest it earns, which results in a snowball effect in how fast your money can grow.
A "common mindset" among young adults is "'I'm not making enough money to care about this yet,'" Allocca tells CNBC Make It. But "you'd have to invest more money later" to make up the difference, compared with smaller contributions made early on.
"I think this whole idea of 'I'll prioritize my goals later' is a really toxic mindset because you don't just wake up later and have money or the habits and the skills to do it," she says.
4. You're able to buy nonessential items without stressing
Being able to buy what you need or want is a "luxury" that many Americans can overlook, says Allocca.
While you probably can't buy every single thing you want, you're likely doing pretty well if you can treat yourself to an expensive coffee or not worry if a restaurant bill is "$35 instead of $30" when you meet your friends for dinner, she says.
"It's something that a lot of people just can't do," Allocca says. "We take it for granted."
5. You're in a better place than you were a year ago
It's easy to compare your finances with other people's, especially on social media where there's always someone who makes more money, has a nicer apartment or goes on expensive vacations that you can't afford.
Allocca recommends focusing on your own financial progress each year instead. Your accomplishments might include sticking to a budget, saving up an emergency fund or getting a raise.
"If you don't have confidence that you're moving the needle forward, it's really easy to stay stuck or to regress," she says. "Acknowledging progress is what builds confidence in your financial future."
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