Financial success can come in many ways. It can come from a great career that skyrockets to the highest levels, from pinching pennies until the savings accumulate, or maybe even striking it rich with a great investment!
Okay, those are extremes. Most people do not reach the CEO level of companies, it’s hard to get rich by saving pennies, and most investments don’t provide “get rich quick” returns. Rather, most of us have to focus on success in moderation in of these areas. We hope to make a good amount of money, we try to live responsibly and save, and we plan our investments to provide a solid rate of return.
All that being said, not everyone achieves big success with money, nor does everyone ultimately reach financial freedom. Sometimes things can derail us, or at the least they can hold us back to some degree.
Here are the 3 areas that I suspect we can focus on in terms of improvements, as aligned with those examples above:
Are We Making Enough Money?
Perhaps we aren’t focusing on our career as much as we could? Or, we expect to live in a 2-person household and risk putting all the eggs in the basket of one person as the breadwinner? Maybe we don’t want to work 40+ hours and put up with the unpleasantness that sometimes occurs when working for others? Well, no matter how we look at it, we need to make money in order to succeed financially.
Money doesn’t fall out of the sky. We need to make it, and sustain cash inflow. To the extent that we have more of it, even if it means trying to make side income, the better chance it gives us to save and invest. After all, it takes making money to save money or invest it!
Are We Saving Enough Money?
Let’s say we are making a solid level of income, but we aren’t saving much. Is it because we are spending money that we don’t need to be spending? There is something to be said for understanding what we want, and differentiating from what we need. Do we need that dream home, or can we live in a place that meets our needs. Do we need that cool car, or could we drive a car that gets the job done and is reliable? Do we have to take that exotic trip across the ocean, or could we take a much less expensive trip to a great domestic location?
You get the idea. Saving money is a big deal, and it’s not just a matter of skipping that occasional coffee drink that will make the big difference. It’s the bigger ticket purchases and expenses that can really have a disproportionate influence on our ability to save.
Are we structuring our life to be able to save? After all, if we don’t save money, there is nothing to invest!
Are We Investing Our Money Wisely?
Okay, so perhaps we have the first two areas covered well enough. We make a decent income, and we’re able to save something. Great!
However, some people can make money and control spending but just don’t know what to do after that. Or, perhaps they are risk averse to the point of not wanting to invest in anything that might involve some risk for potential returns that could accrue. They might let money sit in cash or low-interest accounts, being happy earning 1%. Meanwhile, the inflation and the cost of living increases that regular occur can actually eat away at the savings to the point that they lower in purchasing power over time.
It’s important to be able to invest and earn a rate of return that allows you to build wealth. Sure, there are risks, and decisions need to be carefully made. But increasing the rate of return on investments can really supercharge efforts to increase net worth. After all, if we don’t invest money that we have earned and saved, it’s like running with weights attached to our ankles. Sure we can still move forward, but the progress will be slow!
Bottom line – let’s remember the process: make, save, invest. Then, look at each step of the way and honestly assess how we are doing with our efforts. They build off one another, and being strong with each can be great for our long-term financial success!
Readers, what are your thoughts on these 3 steps? Are you maximizing your success in each of the 3? Do you need additional improvement in one or more of these areas?