What could be considered “financial success” is different for everyone. For some people it can mean being debt-free, owning a home, affording college for their children, buying a new car or second home, traveling around the world, having enough savings to retire—or just being able to pay all their bills every month.
Some may consider financial success to be based on their income, how much money they make. But that income can only make you successful if you’re using it based on thoughtful choices and planned priorities. You could be using that money to accomplish important lifetime goals, or you could be spending it impulsively for short-term rewards. One definition of financial success is being in control of your money. You’ve planned and prepared and your money is doing exactly what you need it to do, both now and for the future.
Regardless of what financial success means just for you, it’s unlikely that you’ll achieve it without controlling both costs and expenditures, knowing what you want to do with your money, and planning how to fulfill those goals. At Delta Community, we offer a series of free classes through our Financial Education Center. We’ve highlighted one of those workshops, 10 Steps to Financial Success, here. If you find this blog useful, we encourage you to join us for the full course and let us help you realize your financial success.
Step 1 – Establish Financial Goals
Step 1 towards achieving financial success is deciding your future goals—what does financial success mean to you? Is it based on covering your financial needs and your wants? Consider your needs; these could include food, rent, utilities, gasoline, clothes, train fare, medical expenses, insurance, paying off debt and other necessities. Then consider your wants, such as buying a home, car or boat, taking a trip, expanding your wardrobe, paying for a child’s education, or supporting a hobby that you’re passionate about.
Step 2 – Take Stock of Your Financial State
Step 2 in determining your financial future is measuring your present finances. Quantify what you have now, making certain to list your financial liabilities, assets, and income to arrive at your net worth. What are all the things that you pay money for, what is your salary, and what do you have of value that could be translated into financial gain? Once you have these basic numbers listed you can then roughly calculate your net worth with the simple equation of subtracting what you owe from what you own
Step 3 – Create a Spending and Savings Plan
At this point in your 10-step financial success program you’ve determined what you have and what you want to achieve with your finances. You know your goals and your resources, and now it’s time to determine how you’ll get to your desired financial outcome. For Step 3, you should create your spending and savings plan, which includes a monthly and annual budget. The plan takes your income and applies it to all expenses, with any overage allocated to special purpose budgets (such as for a new car or a vacation), and, ideally, a short-term emergency fund, as well as to your investments, including those set aside just for retirement.
Step 4 – Live Within Your Means
You’re measured, analyzed, calculated and planned—so what’s next in your program leading to financial success? Well, Step 4 could be summarized as living within your means, which means you’re adopting financial self-control and making lifestyle sacrifices to reach existing and upcoming goals. Holding off on acquiring a few new possessions and experiences now will allow you to enjoy success with your goals later.
Step 5 – Pay Yourself First
We’re at the halfway point with our program to succeed financially, and the next careful step you should be making is to…pay yourself first! So if someone pays you, you may be wondering how you then pay yourself? Paying yourself means saving money as part of your planning, budgeting and living within your means. Decide how much you could set aside every month without negatively affecting your life and launch your savings plan. An easy and automatic method to do this is to have a savings account connected to your checking account, and arrange for your financial institution to transfer some amount of dollars once a month (or more frequently) from checking into savings.