Financial Success: 5 Life-Changing Tips For Your Bank Account
“The difference between failing and succeeding is consistency”
*This post was authored by Jeff Wright They say money makes the world go round, but they also say money can’t buy happiness. So which one is true? Both are true. There is more to life than money, but life will become easier when you have the money. Also, have you ever seen anyone frown while riding a jet ski? Just saying…
Finances can and should be a resource to support our goals (personal or business) and not a resource to obstruct them. With correct money management finances can be just that, but in order to have financial success, finances must be managed. Like anything else in life, we must control our finances or they will control us (bills, debt, doctor bills). If we don’t have control, how can we succeed? We cant.
As an investment professional, I spend much of my time helping people navigate uncertainty and risk to accomplish their goals. Usually, financial success is built over time through intentional planning and disciplined execution. Ultimately setting up processes and behaviors are the way to exercise financial control in a world where we can’t control everything. We can’t control markets, the economy, and often our jobs- but as we discussed in a prior podcast we can control our finances.
5 Steps To Financial Success
Define Financial Success (and Write Down your Goals)
Like all goals, we must define and measure success and then have a way to achieve it. Success doesn’t happen by accident. Decide what your financial goals are so you can manage your finances to them. Do you want to save money for your kid’s college fund? Do you want to cut up the credit cards and get out of debt? Or do you simply just want to save up for that vacation to Hawaii you have been thinking about?
Set different goals based on different time horizons. Identify what you can do in the short term, intermediate-term and long term.
Short-term goals: Build an emergency fund, pay off a credit card, pay off a car loan, maximize my 401k and IRA contributions. Intermediate goals: Save up to pay off a mortgage or for a down payment on a house, save up to buy your next car with cash, pay off student loans or save up to start a business. Long-term goals: Retire at x age (which requires a specific amount of funding sources like investments, social security, and pension), pay for children’s college education, or donating to charity.
Once you have your goals set, manage your finances to intentionally accomplish them. In other words, pay yourself first!
A great way to do that would be to automate your priorities, which I discuss more broadly here. Make sure your behaviors reflect those priorities. Stash that extra cash, that disposable income, or any windfall money you might receive to those goals. Every little bit of money alloted to that credit card, car loan, investment account make a difference.
Even if it isn’t much, a little bit over a long time builds to a lot. Waiting for a big chunk will mean never making progress. Like anything else in life, waiting for the “perfect time” will mean you are waiting forever.
Create A Financial Succes Surplus
Ok you know this one, live below your means. Spend less than you make. (*An investment is different than an expense- an investment will benefit you later, and expense is gone forever). Get out of debt!
This usually means bringing out the annoying “B” word, Budget (ugh). Yes, creating a budget can be painful, and yes, it’s inconvenient but it is so necessary. Think about it, we track our spending in our businesses, why do we resist so much at home? We track our calories when we want to lose weight, but we won’t track our money in order to reach financial success. Perhaps we’re afraid what we might find.
It is so valuable to know where you spend and what you spend on. If nothing else, it’s a valuable exercise to track every dollar spent for just one month. Andy Stanley says frequently “you have to be knowing where your money is going.” If you don’t know where it’s going, it isn’t going towards your financial success.
Creating a budget to spend from going forward is simply how you pre-determine where you put your money. Decide first ahead of time- where each dollar of income will go. Then you can decide how to support that definition of success. If you suck at Excel and Google Sheets as most people do, check out some free templates you can find on the web at places like Clever Girl Finance or Mark Allan Bovair .
There are a million tools, books, websites, on how to create a budget. It almost doesn’t matter which you use as long as you have a way to track and decide your financial behaviors.
For instance, do you need that money in 6 months for one of your goals? Then don’t invest it in the stock market that could be down 40% or more in that time (risky investments require a longer time horizon to allow for recovery) I.E 2020 and Covid.
Can’t afford two mortgages at once? Reconsider buying that rental property in the event it goes unrented for a period of time.
Having trouble making your payments now? Don’t buy more stuff on credit, only increasing your obligations.
You get the idea. Ultimately, try to always be the least wrong and not the most right. Avoid anything that is presented as a get-rich-quick solution (hot stocks! Bitcoin! Multi-Level Marketing Schemes! ) Don’t make any decision so poorly that it causes permanent damage to your financial goals. Diversify your investments, be diligent in your behaviors.
Keep It Simple In Order To Achieve Financial Success
A wise man once said, “keep it simple stupid”.
Small steps compound to big progress over time. Don’t overthink it, don’t take shortcuts. Pay off your bills and save incrementally and consistently.
Like the get-rich-quick schemes, if you have to talk yourself (or someone else) into it, then it’s a bad idea. If you don’t want to talk your spouse into it (because it’s a bad idea), then it’s a bad idea.
Invest in index ETFs and don’t day trade (unless you have hours every day to dedicate to investment and economic research) and even then its probably best to stay away.
Save up for a purchase, don’t go for the complex reverse payment, adjustable, balloon bridge loan (yes, I made that up).
By the way what happened to layaway? That was a great concept.
Finances can be a resource to support our path to success, you just have to build the processes. If anyone applies these 5 ways to achieve financial success, they’ll have a good foundation to build upon towards their goals, hopes, and dreams.
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