How often do you ask yourself; What’s the secret to financial success? How can I become financially successful? The answer is easier than you think.
First, let’s focus on today’s reality. Unfortunately, this is the case for many Americans today.
In a recent 2019 survey, it showed that 59% of Americans are living paycheck to paycheck. This includes people making minimum wage AND people making more than $100,000 each year.
Household debt is at an all-time high. As of May 2020, household debt was $14.3 trillion. I had to google how many zeros were in a trillion. It’s TWELVE zeros. Household debt includes things like mortgage, car loans, student loans, and credit card debt.
These statistics are scary and overwhelming. Over half of Americans are living paycheck to paycheck and have A LOT of debt. So when do you get the opportunity to get out of debt, save, and become financially successful?
If we are lucky enough to not live paycheck to paycheck and can save a little each month, do you still have to work until your official retirement age at say 62 or 67? Unfortunately, that’s the case for many people.
You work hard, pay your bills, save a little, but still have to work for the next 40, 30, or 20 YEARS! That’s not setting yourself up for financial success.
I’ve learned from personal experience that working hard doesn’t mean you automatically become financially successful. For example, my mom has worked 60-70 hours each week for the past 25 years. She’s good at saving, she saves about $8,000 to $12,000 each year.
BUT, at 56 years old she still can’t retire. Why? Because if she did, she would have to take money out of her retirement savings. She has to wait until she is 62 when she can start getting social security benefits (aka, money).
Unfortunately, my mom didn’t learn and what most of us don’t learn is how to become financially independent and secure.
I mention this story because I’ve realized that I can’t just depend on a paycheck for the rest of my working years until I retire. I need to start planning for my future now at 30 and take full responsibility for my financial success.
Becoming financially successful can mean different things to different people. To me, it means not living paycheck to paycheck, saving 30-50% of my income, and making money in my sleep. Making money in your sleep means you don’t have to be there to make money, pretty cool right? We will talk more about that later.
So how do you build wealth? How do you become financially successful? How do YOU decide at what age to retire?
STEP #1 – Create a budget
Creating a budget is the first step to becoming financially successful. If you don’t have 100% control of your money and know where’s it going then you are not setting yourself up for success.
You can be making $100,000 each year and still be living paycheck to paycheck.
I used to think I was good at saving money until I started tracking how much money I was spending. I realized that I was spending anywhere from $350-$500 a month on food. For just one person, me! That is way too much money. I now spend $140 a month on groceries and that is more than enough.
My point with this example is, just because you think you are a good saver that doesn’t mean you are.
Creating a budget will help ensure you are living within your means and are saving money each month. You may not be able to save money right away but you are at least taking control of your money and setting yourself up for success.
Creating a budget and sticking to it also creates and develops a very important skill for your future money management skills. And that is self-discipline.
Check out my 5 Easy Steps To Budgeting Success post. This will guide you to creating a budget that works for YOU.
STEP #2 – spend less than you make
Spend less than you make. This may sound simple and easy but you just read the household debt statistics. Most people are spending more than they make. People are taking out more and more loans. For certain expenses like a mortgage, it’s of course totally understandable to take out a loan. Most of us don’t have hundreds of thousands of dollars to pay for our home in cash.
How do you spend less than you make? It’s tied to the first step. Create a budget. If you create a budget you will be setting specific dollar amounts to categories so that you are not spending more than you make.
Again, this sounds simple but if you are not used to it, it may take some time to start developing this habit. And that is absolutely okay as long as you start.
Just make the decision to spend less than you make.
I recommend reading, Top 8 Purchases You Forget Are Draining Your Bank Account. They are most likely purchases you don’t even think about because they’ve become part of your routine.
STEP #3 – make more money
I didn’t start thinking about making more money until just a few months ago. I’ve always depended on my 9-5 paycheck. But, I have more than enough time to make more money so why not?
If you already have a 9-5, you may be able to work overtime. I can’t do that at my job unfortunately so I decided on a few alternatives to make more money outside of work. First, start a blog, which is what I’m doing now 🙂 Second, bookkeeping. Third, user testing.
There are many opportunities to make extra cash. I didn’t know about the above three until about three months ago so my point is, It doesn’t have to take you a long time to figure out how to make extra money.
You might not need that extra cash right away but you are setting yourself up for success down the road.
step #4 – build your ASSETS
I recently learned about the “build your assets” philosophy after reading the ever famous, “Rich Dad Poor Dad”. Have you read the book? If not, I highly recommend it! It’s a great personal finance book. It opens your eyes and mind to what you’ve been missing.
Building your asset column basically means you are making the choice to invest your money in opportunities that will make you more money in the future. Building your assets means you don’t depend on a paycheck for money or financial stability.
For me, that is the perfect and ultimate example of becoming financially successful. You don’t depend on someone else for money. You decide how much you make and how fast.
Now, it’s important to understand that building your assets will take time. It won’t happen overnight and it probably won’t happen in the next five years. However, if you commit your time and energy it can happen a lot sooner than you think.
My plans for building my asset column in the near future are to start investing in the stock market. You see, this is exactly where you make money in your sleep. You don’t have to be there to make a profit.
Yes, there are risks to investing in the stock market but you can reduce those risks by becoming educated. You don’t lose money you don’t invest and you don’t make money you don’t invest.
conclusion & key take away
If you learn one thing, just one thing, it’s that the first step to financial success is to take 100% control of your money and create a budget.
Your financial success won’t happen overnight. You will need to build a strong foundation first (create a budget, spend less than you make) and then you can focus on building your wealth (make more money, build your assets) and becoming financially successful.
Take ownership of your financial success because no one else will.