There are many things that people do, that put their financial success at risk. However, it is important to note that there is no big secret to success per say, but also realize that it doesn’t happen by accident. Successful people have the self-discipline to constantly work on themselves and their goals. Thus the famous saying by John Rohn, “Success is not so much what we have as it is what we are.” So, what is Financial Success? Financial success is whatever you make it out to be – debt free life, freedom to do whatever whenever etc. Financial success means different things to different people, so what is your idea of financial success?
With that idea in mind, here are 6 biggest risks to your financial success that we have identified:
Normalizing Brokeness
If you find that you are always broke, then you have managed to normalize brokeness. I mean being broke is and has always been the same thing for all people – spending more than you earn. It isn’t rocket science, so don’t chalk up everything in your debased life to poor pay. The truth about being broke is that unless you take drastic measures to improve your situation, you will always remain broke. So learn to suck it up and make those changes in your life that will ensure you have a solid financial footing.
Way Forward: Take measures that will improve your financial situation i.e. increase income and/or reduce spending.
Having No Safety Net
Having a safety net will protect you from financial surprises. Financial surprises such hospital bills, job loss etc, are the number one biggest risk to achieving financial success. One needs to have more than enough cash savings for emergencies and insurance to cover the rest. This way, your financial goals will not be hurt in any eventuality and financial freedom can be achieved within your lifetime.
Way Forward: Get insurance and stash up to one year (or more) worth of pay into an emergency fund.
Bad Financial Habits
Bad financial habits stem from having no self-discipline, failing to exercise your freedom to say ‘No’, lethargy or being simply lazy. Achieving financial success requires a lot of self-discipline and continuous learning that ensures success. Self-discipline ensures that you save more, invest more and spend well. To get financially ahead and end the stagnation, make saving a priority and keep track of your progress as often as possible. Being lethargic has never served anyone any good but brought distress and hardships from failing to understand those basic fundamentals of personal finance.
Way Forward: Study and document your own financial habits. Learn what you are doing wrong and relearn good habits that will guarantee financial success.
Getting Stuck in A Debt Trap
When you don’t have much, it is easy to get stuck in a debt trap because you feel desperate to have this and that. Making decisions when desperate or stressed out, will keep you broke. That is why most people get caught up in debt and scams that fleece them off everything they have.
Another big risk is avoiding/ignoring your debt. When you are broke and bills are piling, you may attempt to avoid these problems and fail to manage your debt. This only makes things worse as you might be blacklisted like those 500,000 mobile loan borrowers. The consequences are grave and a big risk to your financial success – a low credit rating for seven years, for instance.
Way Forward: Don’t make emotionally driven financial decisions – be of sober mind. Also, seek to systematically pay down your debts and pay more attention to the big ones.
Embracing Materialism
If you want to achieve financial success, keep a check on where you are spending your hard-earned money and stop spending on useless things that do not add value to your life. A lot of people find themselves underinvested in areas that yield long-term benefits such as profession, education, savings and investments – and overextended in areas such as luxury products and upscale housing. It is simple. Learn to say ‘no’ and make conscious decisions with the future in mind by aligning these decisions with your future financial needs. Realize, that by embracing materialism you are essentially putting your happiness today before your future financial needs.
Way Forward: If you want those big “wants” in your life, it is advisable to pick one big “want” to budget for and leave the rest for the future. This way, you give yourself a chance to build up some savings.
Not Having A Money Plan
Ultimately, the greatest question is, where is your money? and, what is it doing? If your money isn’t making money for you, then you are basically a slave to your money. This is the biggest risk to achieving financial success. It is easy to just live by and hope that there is money left at the end of the month, but more often than not our own behavior gets in the way of that. Therefore, to curb this behavior, have a plan to automate savings, investments and even bills as soon as your salary hits your bank account.
Way Forward: Develop a financial plan and revise it often – continuously challenge the current way you do things and put to good use your creative and critical thinking skills to course correct your finances every step of the way.
Bottom Line
Overall, financial success is not so much what we have as it is what we are and what we value. Instill self-discipline by saving a portion of everything that you make. Also, invest in experiences rather than things and keep off debt unless you are building wealth with it. Finally, to tie it all together and keep it on track, keep yourself protected from surprises by having an emergency fund and insurance.
Image credits: Top, by Rawpixel via Pexels
Meanwhile, You can click on the following links to read more about financial planning:
- How to Get Out Of Debt Successfully
- 5 Effective Ways to Get Out of Debt Quickly
- 7 Reasons Why You Should Have A Financial Plan
- Managing Your Finances In the Face of Possible Job Loss
- 5 Tips & Tricks To Control Your Spending
- 3 Ultimate Strategies For Financial Prosperity
- The 7 Biggest Money Problems Most Kenyans Have