More than 35 years ago I started talking to people about their financial plans and goals.
Broadly speaking, when it comes to matters financial, there are two distinct groups of people – those who are comfortable with money, and achieve their financial goals, and those who always seem to struggle financially.
I am not making a distinction between rich and not so rich people, or high versus low income earners. I am talking about those who achieve their personal financial goals, and those who struggle with money irrespective of their income.
Of those that achieve personal financial success, some are high income earners, some are not. Some are highly educated, most are not. Some come from wealthy families, most do not. Funny thing is, many of the above characteristics between the financially successful people I speak to versus those that struggle with money are the same.
So if it’s not income, or education, or family background that makes a difference between a person achieving their personal financial goals or not, then what is it that makes the difference?
What is the key ingredient, the common denominator, the secret to financial success?
The answer is blindingly simple. So simple that those who do achieve financial success would be embarrased to call it a secret. And the answer is this.
Those that achieve their personal financial goals spend less than what they earn.
They live within their means, they happily live a lifestyle where there is always a little bit left each pay to save for their future goals. The one key common denominater amongst those that are comfortable with money, and achieve their personal financial goals has nothing to do with how much they earn, who they know, or what they know, but it has everything to do with what they do.
This one simple behaviour then flows on to every financial and lifestyle decision a financially successful person makes. It determines how much debt they are prepared to take on, how much they spend on wants versus needs.
Are they miserly in their spending? In my experience only a small minority are miserly. They are careful, rather than miserly, but importantly all are happy to live a lifestyle that is within their means.
Many people that I speak to who struggle with money, seem to be unhappy adjusting their spending to be less than their income. There always seems to be that car, that house, that holiday, that ‘thing’ that they need (want) to buy that means that they will happily over borrow, or put off investing for. There just seems to be too much fortnight left at the end of each pay?
Are you happy with where you are at with regards to your relationship with money?