Financial success could mean just about anything, if you ask any given person. So ask yourself the question, what does financial success mean to you? Is it reaching a certain level or amount of money? Becoming debt free? Having a few extra bucks in your pocket at the end of the month?
All of these examples could be good measures or goals of financial success. For a lot of working-class people, just having extra money left over after bills and your financial obligations are paid every month, is truly success. At this level, money left over is your way to start saving and investing in your future. As you progress in this system of money management, your financial goals start to change to new levels or larger amounts incrementally.
Depending on what level you are at with your own finances, you should always have goals. Your first two goals should be:
1. Eliminate small debt. Focus on credit cards or loans. Pay them down, one at a time, and don’t use the credit cards again.
2. Create a security blanket savings account. You must have an “emergency” savings account saved. Shoot for a balance that gives you a comfort level to cover the majority of issues that arise, then continue to add whatever you can every paycheck. I mentioned savings account, because this account has to be liquid or readily available to handle unexpected expenses.
These two goals actually work together, because as you pay down debt you will have extra money left over to increase your savings account. Just make sure you stay disciplined and focused on stashing this extra money. Eventually you will get to a comfort level in your savings account where you can easily handle any expenses outside of your normal budget and you won’t need to use any credit cards. Once you get to this point, I would consider this a huge success for most people.
When it comes to credit cards, it’s a good idea to keep one credit card account open and available (once it’s paid off), to be used to handle emergency and/or unexpected costs that exceed your savings account level. This card must only be used for this purpose! Hopefully you will not run into this situation often, as it will unfortunately set you back.
So, what is your measure for financial success? No matter where you are in your own financial situation, there is always room for improvement. Set goals and make your own measures. Track them and stay focused. Work on your monthly budgets, closely monitor your spending. I suggest using a great budgeting tool called Mint.com, it’s free and really easy to use. You can link this program to all your accounts, both savings & checking, and all debt accounts etc. You can then setup each category of spending and input a budget amount. Monitor the budget amount for each category monthly and adjust accordingly. It will take a few months to really understand where your money is going. Once you get this system tweaked, you will know exactly how much you are spending in each particular category. It’s amazing once you actually see where your money is going, the realization sets in and you’ll know where you did well in your spending and where you went wrong (exceeded budget).
Stay focused on monitoring your budgets every money and you will be amazed how much progress you can make once you set you mind to this task. You will know exactly where you can “tighten the belt” and cut back. Evaluate each area closely and determine where you can save money. Put anything you have left over in your savings account until you reach a good comfort level. Once you made that level, it will be time to start finding other areas of investing to actually make money on your money.