This is a guest post by Robert, who lives in Calgary and worked as a financial adviser before retiring at age 35. He is married, has three kids and has returned to school with the goal of eventually living and working overseas.
We don’t often use the phrase “financial success.” What is success? I think that it means achieving goals. A project is a success if it accomplishes the desired outcome. It’s like a race where success is determined the moment the racer crosses the finish line. Was she first? Did she set a new personal record? Did she perform at her peak ability? If the answer to any of those questions is “yes,” the race can be considered successful. A project at work that has a timeline and a budget is a success if it is completed on time and on budget.
Where personal finance is different is that there is no finish line. There may be two separate reasons for this. First, we have to make our money situation work for the rest of our lives. We can declare success in mid-life, not knowing what will happen over the coming decades. The course simply isn’t yet complete. The second reason is that we often compare our financial situation not to objective measures (like a personal record, above), but to other people. This comparison is complicated by the fact that we don’t usually understand their financial situation, relying instead on outward displays of wealth (like house size or car brand). “Keeping up with the Joneses” is like chasing a moving goal post, and it’s unlikely to ever result in success.
In order to achieve financial success, it’s important to set financial goals. One goal that comes to mind, given the theme of this blog, is a retirement age. Along with wanting to retire by 45 (or 55 or 65 or 75, or any other age) comes an amount of money (or income) that will be needed to retire. From that goal, it’s possible to work backward and find what actions and choices need to be made in order to reach the goal. Being on track to achieve your goal can be considered a success. Failures will happen; temporary setbacks will arise that will take a person off track. But that’s simple to correct compared with trying to be more financially successful than the neighbours. Money isn’t a very good way to keep score.
How do you measure your financial success? What do you compare yourself to?