12 Ways to Know You're Financially Stable

Realizing mastery of your finances isn't like getting a college degree -- there's no established set of credits to fulfill. You also don't get a graduation ceremony or monetary gifts from grandparents.

That leaves you evaluating your financial stability subjectively and from several angles. It's not a definitive test, but it is a useful exercise. You'll quickly figure out what you're doing right and where you can improve.

Below are 12 indicators of financial stability. Give them a read to see how you measure up.

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Your credit score may be the most comprehensive quantitative indicator of financial stability. A credit score over 750 usually means your debt level is manageable and you pay your bills on time. It also shows you don't immediately max out all your available credit.

You can see your credit score for free on websites like Mint and Credit Karma. Your bank or credit card provider may also provide free credit score access.

If your score is lower than you'd like, find out why and adjust your process. Your payment history is an influential credit score factor, for example. If you're missing payments, you could set up auto payments that post on the days you get paid. That will force you to pay bills first and spend on discretionary things second.

ALSO READ: How to Understand Your Credit Score: The Complete Guide

I received my first major credit card in my early 20s. I remember being thrilled because I could suddenly buy things that were previously unaffordable. That's a common thought process -- but it's dangerous. Thanks to high interest rates and low repayment requirements, overspending with credit easily creates toxic debt levels.

Paying off your credit card every month -- from your checking account -- confirms you're not spending more than you make, even if you do have available credit. You are practicing spending discipline, which is critical to reaching financial stability. The monthly pay down also spares you from interest charges.

When you're financially stable, you can withstand unexpected expenses or income loss -- without taking on high-rate debt. A cash emergency fund gives you that financial resilience.

Experts recommend a cash savings balance that'll cover three to six months of your living expenses. That way, you can pay your bills temporarily if you lose your job. Or, the cash on hand can fund an insurance deductible if you wreck your car or get injured.

If your cash savings is less than three months of living expenses, budget for a monthly deposit to your emergency fund. Keep dropping funds in the account until you reach your goal.

ALSO READ: What Is an Emergency Fund and Why Do You Need One?

It takes decades of saving to fund a comfortable retirement. If you're not saving 10% or more of your income by your mid-30s, you will likely have trouble building a suitable nest egg.

Here are a few numbers to prove it. A $1 million retirement account can safely support retirement income of $40,000 annually for 30 years. To amass $1 million between the ages of 35 and 65, you'd have to contribute about $880 monthly, including employer match. Those contributions would also have to earn a market-average 7% growth rate.

If you wait until 45 to start saving, the monthly contribution rises to more than $2,000 -- an amount that could be unrealistic unless your income is very high.

Making more than you spend is the key to reaching financial goals. If you're spending every penny of your income, you're not saving for retirement or saving to an emergency fund. You may not be paying off debt, either, beyond your minimum payments.

The fix for spending all your paycheck is budgeting. Step one is looking through your bank accounts and identifying where your money is going. That process usually reveals some places where you can easily cut back on discretionary spending.

If your budget is already as lean as it can be, the next step is to cut back nondiscretionary expenses by downsizing. Consider buying a cheaper car, moving to a smaller place, and shopping around for lower insurance premiums.

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Reliable income is an important element of financial stability. You can have all the right processes to pay your bills on time and fund your savings accounts. But if your paycheck doesn't arrive as you expect, you'll have trouble keeping your emergency account funded.

A regular paycheck doesn't always go hand in hand with traditional employment. You could have a job with an unstable company and not get paid on time. On the flip side, you could be self-employed but have reliable cash flows.

If the timing of your income is uncertain for any reason, try brainstorming passive income streams that would be stable. Recurring dividend income, for example, could be a nice complement to erratic self-employment income.

ALSO READ: What Is Passive Income?

Are you losing sleep at night over money? Or arguing with your spouse, partner, or roommate about finances? A yes to either question means there's room to better your finances.

Committing to a realistic budget solves most financial worries. The challenge you may face is getting your budget to balance. There are only two solutions when your income doesn't cover your spending: make more or spend less.

You'll gravitate toward the solution that's easiest to implement. For example, you might have a skill, like writing or graphic design, that could underpin a side hustle. Or you may have access to quick savings by cutting subscriptions or programming your home thermostat.

Vacations are important for your health. Time away from work and responsibility reduces stress, contributes to overall life satisfaction, and can lower your risk of heart disease.

The thing is, vacations away from home are pricey. Even a budget vacation for two can set you back $250 or more daily in food and lodging. Sadly, charging $1,000 or $2,000 every year so you can de-stress may be counterproductive.

Try allocating a monthly deposit to your cash savings that's earmarked for vacations. This way, you can take a vacation that won't involve the added stress of new debt.

You might open a new account to hold your travel funds. Or, use a bank like Ally that allows you to "bucket" your savings for different purposes.

Routinely paying your bills on time speaks to how organized you are with your money. There are various reasons why you might miss payments. Your income might not cover all your spending. Maybe the timing of your income doesn't align with due dates. Or, possibly you just forget to make your payments.

All these issues are fixable. Start by confirming that your monthly budget balances. If it doesn't, cut your spending or increase your income. Then make a calendar of your bills and income. Set up automatic bill payments if you can. If you have to choose between paying early or paying late (based on when your paycheck drops), choose early. That'll spare you late charges and improve your credit score.

ALSO READ: 3 Ways Paying Your Bills Early Benefits You

You may be investing in your 401(k), but are you also investing outside of your 401(k)? An IRA alongside your 401(k) gives you a broader selection of securities and increases your tax-deductible contribution limit.

A taxable brokerage account can also complement your 401(k). This account won't have any tax perks. But it doesn't have withdrawal limitations, either. Investing regularly to a taxable account could give you some flexibility to retire early or use your funds for something other than retirement. And, as with an IRA, you'll have more investment options versus a 401(k).

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Maintaining the appearance of wealth is expensive. It can require designer clothes, fancy cars, high-end vacations, dinner at the best restaurants in town -- or any combination of those things. The unfortunate reality is that appearing wealthy comes at the expense of actual wealth.

When you don't care about appearing wealthy, you naturally have an easier time prioritizing your discretionary spending. And being able to prioritize spending is a required skill for living within a budget.

Admittedly, it's tough to turn off an attachment to appearances. You might try enforcing a waiting period on yourself -- where you must wait 24 to 48 hours before making a high-priced purchase. Often, after the waiting period is over, the purchase seems less important than it did initially.

Bargain shoppers are not impulsive spenders. They make careful, informed purchases by way of comparison shopping, clipping coupons, checking the clearance racks, and evaluating available loyalty rewards. Over a lifetime, those actions can save tens of thousands.

If you tend to spend on a whim, challenge yourself to hunt for better prices before you transact. For more bargain-hunting motivation, you could also track your savings, rebates, and rewards over time. When your total reaches $50 or $100, celebrate by making an extra deposit to your brokerage account or emergency fund.

ALSO READ: Comparison-Shop for Your Next Stock

There's no one quality or benchmark that defines financial stability. A strong personal balance sheet and reliable income are two must-haves, but you also need to live within a budget and save consistently.

For many, financial stability is a journey rather than a destination. You might pay down your debt, reach your emergency savings goal, and make big contributions to your 401(k) this year, for example. And next year, a job loss or sick family member could consume your emergency fund and put you back in debt.

Fortunately, there's one skill that can carry you through tough times better than anything else -- the ability to set a budget and follow it. The more disciplined you are about spending, the more momentum you'll have towards financial stability -- no matter what the future brings.

Ally is an advertising partner of The Ascent, a Motley Fool company. Catherine Brock has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.