Money is a subject that often makes people uncomfortable, but it doesn’t have to be that way.

Understanding money is not just about knowing how to count dollars and cents. It’s about grasping the concepts of saving, investing, and planning for the future.

Some people seem to have a natural knack for managing their finances. They seem to know exactly what to do with their money.

But how can you tell if you’re one of them?

In this article, we’re going to explore eight telltale signs that you have a better understanding of money than most people.

And hey, even if you don’t tick all the boxes, don’t worry – there’s always room to learn and grow.

1) You’re a budgeting pro

Budgeting isn’t exactly what most people consider a fun activity. It can be tedious, a little stressful, and let’s face it, sometimes downright boring.

But here’s the thing: those who understand money know that budgeting is the cornerstone of good financial management. They’ve made budgeting a regular part of their routine.

If you’re someone who not only sets a budget but sticks to it religiously, you’re already ahead of the curve. You understand where your money is going and how to control it rather than letting it control you.

Good budgeting habits mean you’re planning for both short-term expenses and long-term goals. This is a clear sign that you have a better understanding of money than the average Joe.

But remember, it’s not just about budgeting; it’s about making informed decisions with your money. That’s a key difference between just managing your money and truly understanding it.

2) You understand the power of compound interest

Let me share a bit of my own story here.

When I was younger, I didn’t really pay much attention to the concept of compound interest. It was just another term I learned in my high school math class.

But then, one day, my grandfather sat me down and showed me how it works in the real world. He pulled out his old savings book and showed me how his small, consistent deposits had grown over the years.

He explained that it wasn’t just about the amount he put in every month, but also about the interest he earned on that amount – which then earned its own interest.

The ‘compounding’ effect over time was incredible.

That conversation was a lightbulb moment for me. I started saving small amounts regularly, and watched as compound interest did its magic.

If you, like me, have experienced this ‘aha’ moment and have started harnessing the power of compound interest, you have a better understanding of money than most people.

3) You’re not afraid of investing

Investing can seem scary for many. The fluctuating markets, the risk of losses, the complex jargon – all of it can be quite overwhelming.

Here’s something you might not know: according to a Gallup poll, only 55% of Americans own stocks. That means almost half of the population is missing out on a potentially lucrative way to grow their wealth.

If you’ve ventured into the world of investing and learned to navigate its ups and downs, you’re truly ahead of the game. You understand that while there are risks, there are also rewards.

By investing, you’re not just saving your money. You’re growing it. This level of financial understanding sets you apart from the crowd.

4) You have an emergency fund

Life is unpredictable. Unexpected expenses can pop up at any time, and without a safety net, these surprises can put serious strain on your finances.

That’s where an emergency fund comes in.

This is money put aside specifically to cover unforeseen costs such as medical bills, car repairs or sudden loss of income.

If you’ve built up an emergency fund, it’s a solid indication that you understand the importance of preparing for the unexpected.

You’re not just living paycheck to paycheck but planning ahead to ensure financial stability no matter what life throws at you.

Having this foresight and discipline shows a clear understanding of money and financial planning that surpasses the average person’s.

5) You’re working towards paying off debt

Debt can feel like a heavy burden, a constant weight on your shoulders. It’s not just about the money you owe, but also the emotional stress that comes with it.

If you’re actively working to pay off your debts, it shows a deep understanding of the importance of financial freedom.

You know that being debt-free isn’t just about having more money in your pocket. It’s about peace of mind, about freeing yourself from the worry and anxiety that debt can bring.

Perhaps you’ve set up a realistic repayment plan or found ways to cut back on expenses to allocate more towards your debt. Maybe you’re taking on extra work or have even negotiated with creditors for better terms.

Whatever steps you’re taking, they show a determination to improve your financial health and a deeper understanding of money than the average person.

You’re not ignoring the issue or just making minimum payments; you’re tackling it head-on. That’s something to be proud of.

6) You value experiences over material possessions

I remember the day I bought my first luxury watch.

It was a beautiful piece, and I had saved for months to afford it. Yet, after the initial excitement wore off, I realized it didn’t make me any happier.

Fast forward a few years, and I spent a similar amount on a trip to the mountains. The joy and memories from that experience still bring a smile to my face.

If you, like me, have started investing more in experiences rather than material items, you’re demonstrating a profound understanding of money.

You know that true wealth isn’t about the things you own; it’s about the life you live and the memories you make.

This shift in prioritizing experiences over possessions is a sign that you understand money on a deeper level than most. It’s not just a tool to buy things; it’s a resource to create moments that truly matter.

7) You consider the future implications of your financial decisions

Money isn’t just about the here and now. It’s about the future too.

If you’re someone who thinks about how your financial decisions today will impact your life in five, ten, or even twenty years, you’re definitely ahead of the game.

Whether it’s about saving for retirement, investing in a home, or even deciding on a career path, you consider the long-term implications.

This forward-thinking approach is a sign of financial wisdom.

You understand that money is not just about satisfying immediate needs or wants, but about setting yourself up for a secure and comfortable future.

This ability to look beyond the present moment and make financial decisions with an eye on the future sets you apart from many others. It shows a level of financial understanding that surpasses the average person’s.

8) You’re continuously learning about money

The world of finance is ever-evolving, and even the most seasoned experts don’t know everything.

The key sign that you have a better understanding of money than the average person is your willingness to keep learning.

You read books, follow finance blogs, listen to podcasts, or take courses to improve your financial knowledge. You stay updated on economic trends and changes that could affect your financial plans.

In short, you understand that financial literacy is a lifelong journey, not a destination. This thirst for knowledge and continuous learning is the most important sign that you have a deep and nuanced understanding of money.

Final thoughts: It’s a journey

Understanding money is more than just knowing how to earn and spend it. It’s about recognizing its potential, using it wisely, and leveraging it to lead a comfortable, secure, and fulfilling life.

The path to financial wisdom isn’t always straightforward. It’s a journey that involves continuous learning, making mistakes, and adjusting your strategy along the way.

If you find yourself identifying with these signs, you’re likely on the right path. If not, don’t despair. Each day brings new opportunities to learn and grow.