It is hard to define financial success in literal terms. The meaning of success differs from goal to goal and person to person. Everyone has their own definition and own way to achieve monetary success. You will come across various money experts advising you on how to plan to achieve a better financial future. In this article, we share some tried and tested strategies to help you set your financial goals and make plans to achieve them.
What is the key to financial success?
Financial success may require you to make some lifestyle changes. Financial illiteracy can be detrimental to your monetary goals. No matter how much you earn, if you don’t know how to effectively utilise it, achieving financial success will be difficult.
The significance of financial literacy
Financial success requires you to be money smart. With financial literacy, you can make better spending choices. The best way to start is to create a realistic and sustainable monthly budget. Managing your expenses will help you cut back on your spending. You can recover from financial setbacks by drafting a sustainable budget that involves saving.
Research your options such as retirement strategies, accounts, and retirement plans. You can take charge of your financial situation by increasing your financial literacy. To become money smart, you need to learn basic economic and money management skills.
The true meaning of financial success is having control of your situation. The best to way achieve financial success is by creating rules specific to your life and your financial goals.
Let’s discuss five steps to financial success.
- Establishing goals
Set goals to serve as a guide for your journey to monetary success. However, make sure these goals are realistic. Keep the following points in mind:
- establish goals that are easily achievable and quantifiable
- set a timeframe within which you should achieve those goals
- identify your ‘needs’ and ‘wants’
Consult a financial adviser if you are having trouble setting goals for your financial future. Regularly measure the progress you have made. Periodically review your plan and see whether it needs to be updated. Make the necessary changes to stay on track with your goals. Keep an eye on current circumstances and ensure that your goals are relevant to the need of time.
- Know your net worth
You need to know your net worth before you establish a plan to achieve financial success. This will give you an idea of how long it will take for you to achieve your aims. Draw a clear line between your assets and your liabilities. Don’t use societal scales to determine your financial success.
Keep in mind that every investor is different and what works for one may not be useful to another. Having complete information about your assets makes it easier for you to create a plan specific to your needs.
Following are few aspects you need to be completely clear about:
- your assets and liabilities
- your income and spending
- your risk attitude and capacity to tolerate loss
- Start working on a budget
Budgeting helps you create a spending plan for the money you earn each month. Creating a budget means you will have a clear idea of how much you need to spend and save. It will also keep you on track with your needs. Following a carefully planned budget will keep you out of debt and even help to pay off your current debts.
Your budget should be created based on the information acquired in the second step. Make sure your budget addresses each of the goals and objectives you have set for your financial future. Your financial plan or budget should be created considering:
- your net worth or your current assets
- sum of your annual consolidated tax
- your monthly expenditure
If you are creating a budget plan for the entire family, make sure each member of the family agrees to it.
- Keep up with your retirement savings
Having a budget is entirely different to living on a budget. Some months you are going to overspend, but that’s fine if it was necessary. What is not fine is not planning your post-retirement financial life. The worst thing you can do for your financial life is to be unprepared for retirement. This can turn your life upside down in no time.
Of course, there is the age pension, but it is hard to live on that alone. Make sure you have a retirement plan in place and are depositing money in a retirement account or make additional voluntary superannuation contributions (to avoid the ‘mid-50s savings dash’). Think of your financial future before spending on your ‘wants’.
- Implement your budget today
Once everything is sorted out, it is time to implement the budget plan you have developed. Make sure you are not missing out on any needs of your family members. Ensure that your plan is complete and includes everything you need to lead a balanced financial life. You can create a budget that works for you by implementing:
- an effective investment strategy
- a retirement strategy
- a plan to pay off debt
- life or serious illness insurance
- adjustments for expenditure and income
If you are having trouble creating a plan that meets you and your family’s needs, you should consult a financial adviser. Share your long-term and short-term goals with them work towards bringing more balance to your financial life.
Achieving financial success can be challenging, especially if you are not used to budgeting. Just like any other goal in your life, you need to have an effective plan to achieve financial success. Without a proper plan, you will fail to achieve your desired goals. A financial plan provides you a road map to follow. Keep the steps above in mind to stay at the top of your financial future.
Guest Author Bio: Mia Wilson
Mia is an economist and entrepreneur at ClothingRIC, with a knack for personal finance. She believes one doesn’t have to choose between financial security and a fulfilling life. Mia writes about debt repayment, retirement plans and money saving. Currently, she’s working on a book that details her struggle with shopping addiction.