Financial Success: To successfully manage your personal finances and acheive financial success, here are (7) seven real actions to take now.
Let me start by saying financial success is easy to achieve.
It only requires discipline and the ability to be persistent.
Anyone can achieve financial success through saving, investing, and by being frugal over the long-term.
In this post, I will overview 7 actions anyone can take to achieve guaranteed financial success.
“Your assets are your employees. Invest more on those performing well. Let the non performers go.” ―Manoj Arora,From the Rat Race to Financial Freedom
Financial Success: what does it look like?
Financial success is the following:
Security. Financial security is an underrated advantage of becoming financially independent. In short, financial security is not having to worry about money. If something goes wrong, you have the means to pay for it or support yourself. This leads to a more peaceful, comfortable lifestyle.
No Debt. Financial success means you have no debt besides a mortgage.
Your bank account balance looks nice. A financially successful person has assets, such as a home, stocks, mutual funds, bonds, or index funds. In addition, they have multiple saving accounts that earn interest.
You can afford to help and give. If you achieve financial success, you can help family, friends, or the community.
Financial Independence. Frankly, financial success and financial independence are closely related. Similar to FI, if you achieve financial success, you have the freedom to create the lifestyle you wish.
Afford to buy what you want. Another perk of financial success is the ability to buy what you want. Because you have no debt and low expenses, it’s ok to spend money on what you want from time to time.
Work for passion. Rather than working to pay bills, financial success means you can work for passion and purpose. You have the means to support yourself while you look for fulfilling work. Alternatively, you can afford to work lower paying jobs as passion projects or give back through charitable work.
Freedom to adapt your lifestyle as you wish. Of course, the main benefit of financial success is the ability to spend time how you wish. If you want to spend the middle of a week on the beach, you can because no job or person is holding you back.
Financial Success: The 7 Actions
If you want to end up with a healthy retirement in 20 to 40 years, here are 7 actions to take.
Keep in mind, you should create your own financial plan based on what you want to achieve.
For example, if you want to achieve early retirement, you will need to save more than 10% of your income.
Otherwise, if you’re looking for the easy, slow-FI journey to financial success over the long-term, here are 7 ways to achieve guaranteed financial success.
1. Pay Yourself First 10%
To achieve financial success, you must save money.
Furthermore, save at least 10% of your income.
Ideally, more.
The more you save, the more money there is to acquire income-generating assets that will compound.
Compound interest is why I believe saving a minimum of 10% of income should be a habit.
By paying yourself first at least 10% of your income, you ensure that there is money to acquire assets that will support you in the future.
Related post: Pay Yourself First – How to Pay Yourself First
2. Have No Debt Besides A Mortgage
Of course, in the early stages of life, some forms of debt may be necessary, such as student loan debt.
But to truly achieve financial success, you must have no debt besides a mortgage.
If you have no debt, there are less payments to make.
In turn, your lifestyle is less expensive, so you have more free cash flow.
3. Have An Emergency Fund
To ensure that you don’t withdraw from your investments or go into debt, you should have an emergency fund.
Personally, I save a small percentage each payday and put it in a savings account.
In my opinion, it’s important to establish an emergency fund to stay consistent with your plan.
It’s important to have a buffer to not be forced to subtract from savings, because it halts compound interest.
Having an emergency fund in place creates a buffer to avoid straying away from the financial plan. It allows you to stay consistent and treat your finances like a business.
4.
By investing in the S&P 500, it’s possible for the laymen to outperform even the most seasoned investors. It will turn $10,000 into $420,000 in 40 years.
Based on historical performance, investing in the S&P 500 is a surefire way to achieve financial success over the long-term.
Related post:
5. Buy Your Residence
Shelter is an expense that is impossible to avoid.
Although there is an argument to be made about buying vs. renting, ultimately, buying is better because you have something to sell when you move.
Whereas if you are a renter, you leave with nothing because you were not building equity.
In a way, owning a house is a hedge against rent inflation, too.
Of course, there are situations when renting is cheaper and makes more sense. For example, overextending yourself on your mortgage payment could make it impossible to save money or be prepared for unexpected expenses.
But overall, buying is the superior financial choice because you build equity. If you can keep the monthly cost relatively the same as renting, it will lead to a lower cost lifestyle once it’s paid off. Plus it will boost your net worth and add real estate to your portfolio.
6. Build Additional Income Streams
Another way to achieve financial success is to build additional income streams.
Simply put, if your income streams exceed your expenses, you are cash-flow positive.
So, even if you maintain high expenses, you are in a good financial situation if multiple income streams cover your expenses.
If income streams outside your day job cover your expenses, you are financially independent.
Related post: The 11 Best Income Streams For Financial Independence
7. Be Frugal With What Doesn’t Bring Value
The main difference between being cheap and frugal is the ability to spend money on value.
Cheap deprives, frugal prioritizes value.
Because life is so short, it doesn’t make sense to deprive yourself from what you enjoy.
As such, it makes sense to cut out expenses that don’t bring value. But at the same time, spend freely on what brings value.
Concluding Thoughts on Financial Success
Regardless of your personal financial situation, it’s possible to achieve financial success.
It doesn’t matter if your job provides a pension or not, or if your job pays well.
All that matters is your ability to follow and stick to a simple plan over the next 20 to 40 years.
In summary, to achieve guaranteed financial success, you must do the following:
- pay yourself first 10%
- have no debt besides a mortgage
- have an emergency fund
- invest in the S&P 500
- buy your residence
- build additional income streams
- be frugal with what doesn’t bring value
If you create a plan with these 7 actions, you will achieve financial success over the long-term. In the short-term, you will slowly improve your personal financial situation and gain more independence with each passing day.
Related:
Pay Yourself First – How to Pay Yourself First
Student Loan Debt: (11) Practical Ways To Quickly Pay It Off
View Yourself As A Business To Save Money
The 11 Best Income Streams For Financial Independence
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