Defining What Financial Success Means to You
There is an old story about a young boy who is asked by an adult what he wants to be when he grows up. Not one to waste time as a fireman or an astronaut, the young boy gets right to the point and announces that when he grows up, he wants to be rich. (See also: Do You Really Want to Be Rich?)
The boy’s ambition is one you likely share. After all, how many people do you know who aspire to become poorer as they get older? But what does it mean to be “rich”? While some people might define financial success as achievement of a particular net worth, that may be the wrong way to think about it. As Adrian J. Cartwood, author of the soon-to-be-available book “Share Your Number” and the financial blog 7 Million in 7 Years, explains, "People, even rich people, are often dissatisfied with their level of financial success because they have failed to make the one true connection: that your life isn't about money, rather your money is there to support your life."
Instead of thinking about financial success as a mere number, Cartwood suggests that the best way to achieve monetary fulfillment is to first understand how you want to spend your money — only then can you figure out how much you will need to finance your dreams. "It's only when you find your life's true purpose and calculate how much money you need in order to support the life of your dreams — whether that be $100,000 or $100 million — will you really know what financial success means to you," he explains.
So how does one do this?
1. Take a Closer Look at Your Life
Start by asking yourself questions about what you enjoy doing. This will help you create a clearer picture of your goals for your future and give you a starting point for figuring out what that future will cost. Ask:
- What are your favorite activities, interests, and hobbies right now?
- Do you think you will want to continue doing them in the future?
- Is it feasible to continue some of the things you enjoy now as you get older, or do you anticipate stopping some of them?
2. Dream Big
If money was not an object, what would you love to do? Sail around the world? Build a tropical vacation home? Start your own business? Simply be able to fish every day in the pond near your home? Do not be afraid to name your dreams out loud, no matter how far-fetched they seem. The more specific you can be about your goals for your life, the easier it will be to develop a plan to reach them.
3. Figure Out the Costs
Once you know what you would love to do with your life, you can start to determine how much money you need to pay for your dream future. Depending on your plans, this might be as simple as looking up the cost of buying and maintaining a recreational vehicle or as complicated as estimating how much money it would take to open a restaurant in your neighborhood. Either way, you will need to have an idea of how much money you are going to need to finance your desires and still pay for your day-to-day living expenses.
4. Develop a Savings Plan
Finally, you need to figure out how you are going to earn and/or save the money you need to reach true financial success. The amount may not be enormous; after all, if your dreams are inexpensive, then your personal definition of financial success will be modest. Of course, if you have grand plans for your future, you will need to figure out a way to put enough money away to be able to live the life you desire. And more importantly, you will want to start living that life as soon as possible. Consider your current earnings, how much you are likely to earn in the future, and how much money you can put away on a regular basis. Talk to an investment advisor to help develop a plan to make your savings grow.
It may take hard work and planning, but having the money available to give you the life you truly desire is a worthwhile and reachable goal — and it's the true measure of financial success.