What Is Financial Success And Why It’s Important

Because Understanding Financial Success Is The First Step To Achieving It

The purpose of this article is to discuss the question: what is financial success?

Because 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.

But I think most of us can agree on a few key elements. That connects the dots on today’s topic.

So, let’s get started…

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 that 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 personal finance. 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…

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Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

Keys To 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, our 5 keys to financial success are:

  1. Income exceeds expenses
  2. A good handle on debt
  3. Emergency funds are in place
  4. Savings plans in progress for big-ticket purchases
  5. 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.

And while we are talking about expenses, I’m including this next item…

A Good Handle On Debt

Because your income should not only be enough to cover all of your expenses. But there must be enough left over to make your minimum debt payments.

Your credit score depends on it!

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 3 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 on hand.

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, start thinking about 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 to achieve it.

Next, let’s talk about the steps to help you get there…

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Steps to Financial Success

For anyone interested in how to achieve financial success. I suggest these 5 steps:

  1. Assess your current financial situation
  2. Establish financial goals
  3. Make a plan to achieve your financial goals
  4. Take action and work on your plan
  5. Monitor progress

Let’s briefly talk about each one…

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.

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!

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.

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.

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.

Monitor Progress

Finally, take time to step back and monitor your progress. Do so every month.

Because no matter how hard you try. Things will come up to throw you off course.

Especially when you are 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 people want to become millionaires. And others just 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 5 keys to financial success are the same. They are:

  1. Income exceeds expenses
  2. A good handle on debt
  3. Emergency funds are in place
  4. Savings plan in place for big-ticket purchases
  5. Investing for a secure retirement

And the 5 steps to financial success remain unchanged no matter your situation:

  1. Assess your current financial state
  2. Establish financial goals
  3. Make a plan to achieve your financial goals
  4. Take action and work on your plan
  5. Monitor progress

That’s all for today. If you enjoyed this article, you may like all of our…

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Author Bio, Disclosure, & Disclaimer: Please join me (Tom) as I try to achieve my goals, find my next place to live, and make the most of my money. However, I am not a licensed investment adviser, financial counselor, real estate agent, or tax professional. Instead, I’m a 50-something-year-old, early retired CPA, finance professional, and business school teacher with 40+ years of DIY dividend investing experience. I’m here only to share my thoughts about essential topics for success. As a result, nothing published on this site should be considered individual investment, financial, tax, or real estate advice. This site’s only purpose is general information & entertainment. Thus, neither I nor Dividends Diversify can be held liable for losses suffered by any party because of the information published on this website. Finally, all written content is the property of Dividends Diversify LLC. Unauthorized publication elsewhere is strictly prohibited.

What Is Financial Success And Why It’s Important Explained