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Understanding Financial Success Is The First Step To Achieving It
The purpose of this article is to discuss financial success and how to achieve it.
How can you achieve something so important? If you don’t even know what it is? And here’s the hard part. Becoming financially successful is different for everyone.
However, I think most of us can agree on a few key elements that connect the dots on today’s topic.
So, let’s get started. When we are done, you will know how to be financially successful.
What is Financial Success?
First of all, the Merriam-Webster dictionary defines success as “a favorable or desired outcome”. So, financial success means achieving a desirable outcome for one’s money and finances.
Why Is Financial Success Important?
Financial success is important because without enough money and financial resources. Life can be very difficult.
Since it’s no fun to live paycheck to paycheck and worry every month about having enough money to pay the bills. To meet basic needs for food, shelter, and transportation for our families.
Also, with one’s money taken care of. It’s easier to focus on those other things. That makes life a little better.
Because there is an old saying I think is very true, it is “there is more to life than money”. For example, relationships, health, and memorable experiences.
So, by improving your finances. You can improve your life.
That’s why these tips for financial success are important!
With the definition and importance of financial success under our belts. Let’s talk about the most essential elements to help you get there…
PinDisclosure: At no cost to you, I may get commissions for purchases made through links in this post.
The Foundation For Financial Success
No matter how much money you have. Or, how much money you want, in my opinion, several keys will lead to the level of financial success you would like to achieve.
As a result, there are several keys to financial success:
- Income exceeds expenses
- A good handle on debt
- Emergency funds are in place
- Savings plans in progress for big-ticket purchases
- Investing for a secure retirement
Let’s talk about each of these…
Income Exceeds Expenses
One’s income must exceed their expenses. Sometimes this is referred to as “living below your means”.
And there are two clear-cut options to bring this equation into balance. Either make more money at your job. Or, spend less money.
It’s that simple! But easier said than done, I suppose.
While discussing expenses, I’m including this next item…
A Good Handle On Debt
Because your income should not only be enough to cover your expenses, but there must be enough left over to make your minimum debt payments.
Another aspect of debt management is this. Not taking on new debt. Especially from your credit cards.
As a result, it’s a good idea to limit your debt to no more than these three categories:
- Student loans
- Auto loans
- Home mortgage
Now, with your income exceeding expenses, including debt payments. Hopefully, there is a little money left over.
That’s when you can start moving your finances up a notch. To do so…
Emergency Funds Are In Place
First, establish an emergency fund because most financial experts recommend having 3-6 months of living expenses to cover a loss in employment. Or emergency purchases. Such as when your refrigerator breaks down.
Savings Plan In Place For Big-Ticket Purchases
Second, consider saving for those big purchases that most of us have in life. Typically, they are:
- New autos
- A home
- Your children’s education
Once you have your emergency fund in place, allocate your savings to these items.
Investing For A Secure Retirement
Third, no one can work forever. So, it’s a good idea to think beyond the short-term by thinking long-term, too.
Thus, start saving for retirement as early as you can.
Look to your employer first. And participate in the retirement plan that is offered. Typically, that will be a 401(k) or 403(b) plan.
The first rule of thumb when starting to save for retirement is this. Contribute enough to your employer’s plan to maximize whatever matching contribution they offer.
Okay. Now you know what financial success is, why it’s important. And the key elements involved in achieving it. Next, let’s talk about the steps to help you on the journey to money and wealth…
PinHow To Achieve Financial Success: 5-Step Plan
For anyone interested in achieving financial success, I suggest these 5 steps:
- Assess your current financial situation
- Establish financial goals
- Make a plan to achieve your financial goals
- Take action and work on your plan
- Monitor progress
Let’s briefly talk about each one…
1. Assess Your Current Financial Situation
Every journey has a starting point. And knowing exactly where you are at right now is critical.
Ask yourself the following questions. Then, get the answers.
- How much money do I make?
- How much money do I spend?
- Where do I spend my money?
- What debts do I have?
- How much savings do I have?
- Do I have investments, and if so, what are they?
If you are starting from scratch, a good place to begin is by preparing a monthly budget.
It should list all your sources of income. And all the major categories of expenses you have each month.
And here is a tool I recommend to help you along the way. It is a free financial app from Personal Capital (now called Empower)
Personal Capital is a great tool to bring your finances together all in one place for seeing your expenses, making a budget, and managing your investments.
Be sure to check it out because your financial planning depends on it!
2. Establish Financial Goals
Next, go back and look at the 5 keys to financial success. And decide where you are falling short. Then, set financial goals to improve upon your situation.
For example, if your income does not exceed your expenses. Set a short-term goal to reduce spending.
Look at the monthly budget you prepared. And make reductions where you can.
Or if you need to make more money. Set a medium-term financial goal to get a higher-paying job.
3. Make A Plan To Achieve Your Financial Goals
Every goal you set needs an action plan. So, start planning.
To determine the necessary steps. And when those steps need to be completed. To achieve your financial goals.
4. Take Action And Work On Your Plan
Now, with a firm understanding of your present financial state. Plus, a manageable number of goals will improve your current situation.
You know where you are at. And exactly where you want to go.
So, get busy. And work on your plan.
Do what is necessary to accomplish your financial goals.
5. Monitor Progress
Finally, take time to step back and monitor your progress. Do so every month.
Hopefully, by now, money will flow your way. However, no matter how hard you try, things will come up to throw you off course.
Especially when trying to achieve challenging goals that will improve your habits for financial success.
Okay. That covers everything I wanted to address.
So, allow me to summarize and wrap up with a few parting thoughts before you go on your way…
What Is Financial Success And How To Achieve It
Financial success means achieving the desired outcomes for your money. Once you have achieved the level of success you desire. It’s easier to pursue other important aspects of your life.
But success with money is different for everyone.
While some want to become millionaires, others only desire enough money to live comfortably, avoiding financial distress.
The great thing is it doesn’t matter who you are. What you want. Or, what you are trying to accomplish with your finances.
Because the keys to financial success are the same. And the 5 steps to financial success remain unchanged no matter your situation:
- Assess your current financial state
- Establish financial goals
- Make a plan to achieve your financial goals
- Take action and work on your plan
- Monitor progress
That’s all for today. If you enjoyed this article, you may like all of our…
Posts about Setting Goals And Your Money
PinAuthor Bio: Tom Scott founded the consulting and coaching firm Dividends Diversify, LLC. He leverages his expertise and decades of experience in goal setting, relocation assistance, and investing for long-term wealth to help clients reach their full potential.
How To Achieve Financial Success And Why It’s Important Explained
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