There is no one definition of financial success. The definition varies from country to country as we see from the picture above (MasterCard survey 2014). It also varies from individual to individual. For some, financial success is simply having a positive net worth, where their assets are more than their liabilities. For others, financial success means being debt free. What one person might consider to be financially successful, may be wretched for someone else because their lifestyle and preferences. Individual needs and wants differ on many levels. If most us had $50,000,000 we would feel financially successful. If Donald Trump’s net worth was $50,000,000, I don’t think he would feel financially successful. In fact, with a net worth of $50,000,000, he would probably just be able to make ends meet.
It is difficult to define financial success in a value amount because it is subjective in every case. Instead, we can define financial success in terms of the relationship between work and income. There are three stages we all strive to achieve. Each stage is a natural progression from the other. The reason we need to know these stages is so that we can determine what our next move will be. Without having a goal we are like leaves in the wind blowing hither and thither. When we have a goal we can program the destination and like a missile head directly for the target. Knowing the stages of financial success allows one to determine what financial course of action needs to be taken, if any.
The first stage is the survival stage, the stage of financial security. At this stage we can meet all basic needs are met, for instance food, housing, clothing, cars, and basic recreation. Here we are comfortable. However, our security is contingent upon us working. Working for our living is what keeps us afloat. To ensure financial security, we have to make sure we don’t get fired or that our business is at least making enough for us to live off. The grind of working 9 to 5 or 9 to wee hours in the morning if you’re a business owner is an essential requirement at this stage. The majority of the population falls into this category. It is here that they live, work and die.
The second stage of financial success is stability and here we are independent of work. Passive income is the name of the game. All our basic needs are met and we don’t have to work. Classic examples of passive income are real estate, investments and royalties. The more recent sources of passive income are affiliate marketing and network marketing. So at this stage, life is pretty cool, with little effort you are able to have income to meet all your basic needs and there is no need to work. There is a small group of society that falls into this category; you may even know a few who are in network marketing or real estate. (Look out for an upcoming post on ways to earn passive income).
The third level of financial success is affluence. This is where we would ALL like to be. At the affluence stage, we have true financial freedom. At this stage you can meet all your needs and wants and you don’t have to work. This stage is occupied/controlled by very few. This is the class of old and new money. Now, when I say very few are at this stage, I mean that literally. There are 85 rich people on this planet that has virtually the same wealth as the combined wealth of 3.5 billion poor people (approximately half the world population). This statistic was taken from a report entitled Working for the Few. The report was released by Oxfam in 2014 and it went on to say that:
- Almost half of the world’s wealth is now owned by just one percent of the population.
- The wealth of the one percent richest people in the world amounts to $110 trillion. That’s 65 times the total wealth of the bottom half of the world’s population.
- In the US, the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009, while the bottom 90 percent became poorer.
The report also points out that this inequality is not very democratic because the wealthy tend to have a greater influence on the government. This results in policy making and rules that favor the rich. These are indeed grim statistics and even grimmer implications when it comes to government policies. Is it any wonder that many feel very frustrated by it all? It seems that our society is structured in such a way that the masses at the bottom work to sustain the few at the Apex.
While this may be the reality we face now, it doesn’t mean that it has to be our reality forever. What if we can change our circumstances, if only to move up one step further up the ladder? We have two choices; we can throw our hands up in the air and think we are doomed so why bother to try. Or we can figure out where we want to be and start working towards it. In a previous post I talked about MINDSET as the key to financial (life) success. When we study the lives of those who have made it financially (the nouveau riche), they all have one thing in common. They have the mind to succeed, they overcame the programming that they grew up with, they became more than they were told they could be. Think Steve Jobs, Ophra, Tony Robins, and read up on the Dragons. They all started out just like many of us and they found their passion and the rest is history.
I do believe that success in life really starts in our head. It’s cliché to say, but if we believe we can, we can and if we believe we can’t, we can’t. It is as simple and as complex as that. If we can combine a well thought out financial plan (tools and strategies) with a belief system that supports our goals, then our financial success is assured.
So where are you right now and where do you want to be? What’s your next move? Do you know? Does your belief system support your financial goals?