If you think about it, our definition of success changes over time. As society goes through monumental changes, we all expect success to come in different forms. What was deemed successful in the past is just the norm for today.
So how can we define financial success?
It actually depends on your own financial goals. Forget about what society dictates and think about what you want to have for your future. In the end, you alone (and those depending on you) will benefit from any financial success that you will achieve. You get to control your finances and set your own standards so it leads you towards where you want to end up.
Naturally, when you think about your goals, you usually pattern it from someone that lives the life that you want to lead. That means you want to look at how the rich people live their lives so you can emulate that and attain the lifestyle that they have.
How does the wealthy think and spend their money
There are four important characteristics that define how the wealthy think and spend their money. It is important that you familiarize yourself with how they use their money so you can understand how they get to be rich and continue to grow their wealth.
They live below their means. The norm for most of us is to live within our means. If you want to be a financial success, you need to live below your means. This is because you want to have the extra money after your expenses so you can put money in your savings and your investments too. Believe it or not, the self made millionaires are those who live on a budget. If you really want to make sure that you are not spending more than what you are earning, a budget can help you limit your expenses.
They spend on things that will bring them more money. This is the key that will help the rich grow richer. They know how to spend their money on the things that will generate more income for them. For instance, let us assume that you have saved $500,000 to buy your own home. Most of us, will look for the best home we can buy for that amount. But a financially success person will do it this way. They will look for a home that is just right and will meet the home requirements of the family. They will look for the cheapest they can get – which for a family of 4, for instance, can be $300,000. The remaining $200,000 can be used to buy another home that they will lease to tenants. Instead of buying just one house, they get two cheaper homes and generate income from the other.
They have an emergency fund. Another important characteristic to be a financial success is to have an emergency fund. Successful people should be too confident to rely on borrowing money to get themselves out of tight spots. They should have the foresight to determine the amount that they might need and prepare for that eventuality. That is how they secure the wealth that they have built for themselves.
They prepare for their future. Lastly, if you want to be successful with your money, you have to learn how to prepare for your future. You always think about how every money transaction will affect your future. Will it put you in unnecessary debt or will it bring in more income for you? If you really want to be perceived as a success, you should always work for your future and not just what you can enjoy today.
How to speed up your financial growth
If you want to live like a financial hot shot, there are a couple of things that you must do. But before you do, you have to know where you currently stand. It pays to know your personal net worth so you know how much you need to target. This can be easily computed through online net worth calculators like the ones from Money.com or Bankrate.com.
When you have the starting point of your net worth, here are some tips that you can do to help speed up the growth of your finances.
Get rid of your debts. First of all, get rid of the financial aspect that compromises your growth – which is debt. To be a real financial success, you need to be debt free.
Spend only on what will contribute to your net worth. Stop spending on the wrong things. Stop buying things that will only end up as junk in the future. Even if they are inexpensive, if you keep on doing that, it will accumulate into a big amount in the end.
Always put money into your savings. A dollar saved a day will grow into a significant amount so do not let your limited resources hinder you from saving. Just be consistent and soon you should be able to grow your savings to help you during tight spots.
Invest your money. When you have enough savings and you have money to spare, invest it. Take an amount that you can risk and use it to fund an investment. That is an active way of growing your money.