Financial Success: Definition, Importance, Strategies

Sharing is caring!

The goal of achieving financial success is merely a wish if you don’t have a solid financial management plan to make that dream a reality.

Financial success is defined as a favorable outcome. To reach that goal, create a budget, and pay off credit card debt. Avoid high-interest loans, calculate your net worth, think long-term, increase investments, diversify, create emergency funds, get insurance policies, and live frugally.

So, with that said, if you want to experience the thrill of financial success by implementing ten tried and tested strategies to best manage your finances – read on!

Financial Success Definition

Even though the Merriam-Webster dictionary defines success as “a desired or favorable outcome and a degree of attaining eminence, favor, and wealth,” most people have their own definition of financial success.

And regrettably, only 45% of the US population is financially illiterate. Therefore, gaining financial proficiency by defining your financial success is an excellent place to start your money management journey.

Importance Financial Success

Financial success is more than accumulating funds; it fosters peace of mind and a general sense of well-being. Let’s face it, life can be enormously challenging without financial success.

Especially if you are living paycheck to paycheck, dealing with the added stress of paying bills, and meeting your family’s basic needs for food, shelter, transport, clothing, and education.

Taking charge of your finances also allows you to focus on what truly matters, like your relationships, mental and physical well-being, and sharing special moments with loved ones.

So, by taking charge of your finances, you can lead a far more full life, which is much easier than you may think!

Practical Strategies to Obtain Financial Success 

Here’s a deep dive into the ten most effective strategies to manage your finances with practical methods to make your money work for you.

Especially if you want to grow your nest egg for a comfortable retirement where you can focus on doing the things you love most, like finally seeing the world (in 80 days) or buying a chateau in the South of France without the added worry of paying for day-to-day expenses.

Create A Budget And Stick To It

Managing your finances can feel overwhelming at times. So, the key to financial success is creating a simple budget to track your income and expenses, as you will quickly notice where your money is going.

There are numerous free budgeting smartphone apps; one of the best is the Consumer Financial Protection Bureau (CFPB) budgeting tool. Alternatively, use a spreadsheet to manage your finances.

It is essential to use a budgeting tool that is easy to use so that it becomes a daily habit to track your expenses. It becomes easier to spot non-essential expenses that can be eliminated, like your morning coffee on the way to work.

Most importantly, be realistic when setting up short-term budgeting goals, then finetune those goals every month to become more sustainable.

And allocate at least 10% of your income towards your retirement savings which is easier to manage if you have an integrated platform to manage your income, expenses, and investments.

Get Rid Of Your Credit Card Debt

It is impossible to invest or save if you are drowning in debt. And with an average credit card interest rate of 18.43%, it is easy to rack up eye-watering amounts of credit card debt quickly.

According to recent data released by the Consumer Financial Protection Bureau (CFPB), Americans spent $120 billion on servicing credit card debt from 2018-20, which could have been spent on investments.

If you want to pay off all your credit card debt, paying your installments in full each month and paying only for purchases in cash is essential. In other words, lock it away!

And the easiest way to pay off all your credit card debt is by using the debt snowball or debt avalanche payment method by focusing on paying off the balance with the highest interest rate first.

So, you will need to make minimum payments to service all your debts, then pay more on your credit card account that attracts the most interest until it is completely paid off.

Then you will have more funds to pay more towards your credit card payment, attracting the second highest interest rate. In that way, you will eventually pay off all your credit cards and have enough cash liquidity to save and invest.

Avoid High-Interest Loans

A surefire way to curtail your financial well-being is by applying for a short-term, high-interest loan like a car title or payday loan.

As per the Consumer Financial Protection Bureau (CFPB), most 2-week payday loans accrue a fee of at least $15 for every borrowed $100. And the 400% annual percentage rate (APR) is far higher than any credit card or private loan interest amount.

If you do not have adequate savings and need funds for an emergency, opt for a small loan through your bank, which will offer you a more favorable interest rate.

Calculate Your Net Worth Is

Determining your current net worth is the only way to ascertain how long it will take to achieve your goals and whether they are feasible. So, how do you do that?

All you need to do is to consider the difference between your current assets and liabilities by adding up your current income, savings, and investment total amounts minus your monthly expenses and debt repayments.

Think More Long-Term

While having short-term financial goals is fine, it is essential to also have a long-term investment, especially if you want to use compound interest to grow your investment.

It is essential to note that some compounding rates are higher than others. So, it would be best to consider your long-term investment potential growth rates to maximize your long-term investment’s growth through the effects of compound interest.

Therefore, review the compounding rates of savings, CDs, and money market accounts to maximize the growth of your long-term investments to pay for a house deposit, a new car, or your children’s future college fees.

Consider Investing More For An Early Retirement

Once you become more confident in your financial management skills, creating new achievable investment goals becomes more manageable.

So, start investing in a 401(k), traditional IRA, or Roth IRA as early as possible. However, please review your options, as all retirement investment schemes have their own funding and tax rules. Thus, reading “the fine print” is essential before investing your hard-earned money.

Alternatively, once you have reevaluated your current assets, consider adding additional retirement savings strategies to your current investment portfolio.

And, you may be able to comfortably retire at an earlier age than your peers if you manage to set aside enough funds to enjoy your golden years.

Don’t Try To Put All Your Eggs In One Basket

Diversifying your investments is a prudent risk-mitigating strategy. While some investments typically provide higher returns, they are also more volatile, so you must have a well-balanced investment portfolio.

Reviewing the historical and current performance of any potential investment and diversifying your investments in various asset classes like real estate, cryptocurrencies, stocks, or bonds is essential.

Most importantly, opt for investment tools you can track on your smartphone that are easy to understand with helpful graphs and pie charts.

And start with “baby steps” by investing in companies that allow small investments, which you can expand with time and grow your portfolio to achieve your investment goals.

Diversifying your investment portfolio does not necessarily guarantee that you will make a profit. Although, investing small, manageable amounts in various asset classes is an effective way to navigate turbulent financial markets and to become more confident in your investment skills.

By starting with small and diversified assets, the impact of making mistakes is less severe. You will be better equipped to manage more substantial future investments.

Establish An Emergency Savings Fund

We all know that unexpected life events like a medical emergency or a broken car can wreak havoc on our finances.

And, regrettably, only 39% of the US population had adequate savings to pay for an unforeseen $1000 expense.

So, it’s no wonder that the leading cause of bankruptcies is insufficient savings to cover unforeseen events like losing a job or paying for a hospital bill not covered by your medical insurance.

Ensure that your emergency savings fund is not subject to a withdrawal notice period so you can quickly access the funds if needed.

Invest In Comprehensive Insurance Policies 

The added expense of paying towards insurance may seem unnecessary if you don’t typically need to make claims.

However, having insurance policies in place can drastically reduce unforeseen medical expenses or when your property is damaged and needs to be repaired.

It is vital to consult a professional insurance broker who can advise you on the best insurance policies and explain their respective terms and conditions to avoid nasty surprises when submitting claims.

Live Below Your Means

Even though we live in the age of consumerism, and most people want to keep up with the Joneses, setting boundaries on your spending level is a prudent way to manage money.

So, it’s no wonder those who have grown up with “old money” know how to live below their means and spend their money wisely without wasteful expenditure on frivolous items like the latest mobile phones or any other unnecessary items purchases.

Tips In Achieving Financial Success

Investing in yourself and your financial literacy is one of the smartest investments you will ever make!

So, consider becoming more financially savvy by taking financial planning courses to better understand how to prioritize your savings, grow your current investment portfolio, and adequately plan for a comfortable retirement that will allow you to thoroughly enjoy your later years.

And becoming accustomed to the core building blocks of efficient financial planning, like budgeting, managing your debts, and prudent investment strategies, will pave the way to future financial success.

But, most importantly, set aside enough time for comprehensive research to find a qualified, accredited financial adviser who can give you solid advice concerning the most lucrative investment products.

And remember to review your financial plan to ascertain whether you are still on track to reach your short-and long-term goals. Like annual medical checkups, your investment strategies must be scrutinized at least once yearly to confirm that it is still “healthy.”

Dos And Don’ts of Financial Success

One of the best financial decisions you will ever make is to automate your savings, mainly because you won’t be tempted to spend any funds automatically deducted from your account. It is far easier to invest for long-term goals.

Do learn the difference between a “want” and “a need,” especially when faced with tempting annual sales like “Black Friday” promotions when it is easy to blow your budget.

Check your credit score regularly, as financial institutions gauge your fiscal health based on your score. Mistakes can creep in to lower your score, so they need to be addressed timeously.

And don’t be swayed by “bear market” episodes when the value of your invested stocks declines. Global financial markets fluctuate, and selling potentially lucrative stocks or other assets before they stabilize is not always prudent for long-term investment strategy.

So, don’t make hasty decisions concerning your investments based on hysteria or on your emotions, as it can cost you dearly in the long run.

Don’t be tempted to use your credit card for day-to-day purchases like food; instead, draw a limited amount of cash, as it is far easier to curtail your expenditure with cash than when you are “packing plastic.”

Don’t be tempted to exceed your credit card limit. Ensure you pay any used amount in full to avoid hefty future interest payments that can quickly snowball and get out of hand.

In other words, pay yourself first with savings and investments before you spend your hard-earned money on impulse purchases.

Wrap-Up

Even though the textbook definition of success is a “desired or favorable outcome,” the first step towards attaining financial success is to create your own definition of what success constitutes.

And once you realize its importance in providing lasting peace of mind and employing efficient strategies to create long-term financial success, you have mastered the building blocks for a comfortable and enriching future lifestyle.

PIN THIS FOR LATER…

DID YOU FIND THIS INFORMATION HELPFUL? Share the love on social.

Follow us on Pinterest & Instagram!

ANY OTHER BUSINESS ADVICE WE CAN WRITE ABOUT?

Let us know, email us at: Advice@TheBestBusinessAdvice.com

Sharing is caring!