What does Financial Success look like?
I have discovered that many people have different ways of identifying their personal financial success and it is often very personal – close to their heart and mind.
By what metric
Some of the examples I have heard people judge their financial success from are:
Savings
Are you seeing the numbers of your accounts go up or go down? Do you have more liquid cash available for situations in which it is necessary? Do you have the ability to make money off of the money you’ve saved?
Goals
Some people have imagined a life goal for themselves – an education, a perfect home, or even a nice car. How about paying off a significant debt? Retiring at a certain time in their life? Establishing a new life skill? How about start a business? These goals are a huge motivation for some people to increase their finances to be able to afford them.
Networth
Does your overall net worth (your positive-worth assets like bank accounts, retirement, or home equity subtract all your debts such as student loans or credit cards) trend upwards?
Value
Never underestimate the value of yourself in the midst of making money. I will continue to say that financial journeys are a psychology as much as a science.
Do you have enough peace of mind in your budget to leave a job which treats you unfairly? Can you take time off when necessary for life events? Sometimes, the goal is simply to allow life to happen without de-railing the financial journey.
These are just some of the examples that have come up in conversation. There are many more. What do you think?
Comparison
I like to bring this important idea up at the beginning of financial discussions with others.
Financial Wellness is a psychology as much as a science. So we must consider our reactions to the metrics we set (or lack thereof) as much as we consider the metrics we choose.
The example I hear a lot is something like this:
Often we see individuals with idealistic lifestyles that are enviable – they own the nice house, car, clothes, or etc. which we wish we had.
I want to pause here for a moment and think about metrics again.
- Why are we desiring this thing we see?
- If someone has these things, how have their metrics changed?
- Has their situation increased or decreased their savings or net worth?
- Does a purchase aid them in their career, future, or personal life?
The picture of someone else’s public presentation is not always the picture of their financial success.
If we compare ourselves to what we see and not true metrics, then we are losing the value of our personal sanity – where the comparison we are making may not even be justified. The situation we are idealizing may not even be what we truly see.
Therefore, the next time you see yourself compared to someone else, I challenge you to think if it is truly making progress for you. If it isn’t, comparison is the thief of joy. Think about how far you have personally come instead. Try to remember this is a personal financial journey and it is just that – personal. Start from the goals you have set and realize how far you have come.
Financial Success Metrics
Some questions I tend to ask when first discussing finances to get everyone on the same page:
What are your goals?
Some frequent examples are:
- Are you planning on a home downpayment?
- Retirement? Early retirement?
- Do you want to save for university for your children?
- Save for healthcare expenses; now or later?
What is your time horizon?
Meaning how much time can you invest or save before your goal will be acted upon?
- Days? Months? Years?
What is your risk tolerance?
Can you watch your finances fluctuate year to year or do you favor stability over potential for increases? (These terms are usually used for investment portfolios)
- Highly Aggressive
- Aggressive
- Moderate
- Low
These financial success metrics are often used as a baseline conversation to help develop plans for financial success. It is not a metric, so much as the information surrounding a person’s planning – and takes into account the individuality of a person’s investment tolerance too. Savings is a psychology as much as a science.
For those of you interested in reading more – see my post on Financial Planning!
Hope this helps you think about how to measure your goals in a more objective way. Keep up the amazing work towards your goals!
From my mind to yours!
~Jay
I enjoy sharing what I have learned through my own personal finance journey!
