5 principles of financial success

The definition of financial success will vary from person to person but generally speaking, financial success can be defined as living out your desired outcome for your money. There are numerous principles that govern financial success, as rules govern society. It is therefore essential to adopt the correct principles in order to achieve what financial success means to you.

This blog discusses the 5 principles of financial success, but bear in mind that this list should be used in conjunction with other financial principles in order to achieves financial success.

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1. Pay yourself first and at least 10%.

This principle suggests that when you receive your salary for the week/month, you should first of all set money aside for yourself. This means sending money straight into your savings account, and the amount should be at least 10% of your salary. By adopting this principle, you begin to grow the “save first and spend what is left” mindset as opposed to “spend then save what is left”. If you can, and if your salary permits, you should save a lot more than 10% but generally speaking, 10% is a good starting point.

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2. Create a budget or a personal finance tracker.

Our blog ‘5 tips on Improving your Personal Finances’ discusses the benefits of creating a budget to improve your finances. This is a very important principle that requires a significant amount of discipline. To become financially successful, you need a budget to know where your finances are at any point in time. Without a budget, financial success will seem a million miles away whereas all that is needed is a solid plan. In order to have a solid plan, you need to know exactly what your numbers are telling you.

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3. Add value where your input is required.

The principle of adding value is when you regularly go above and beyond to genuinely solve problems for others. Obviously, you cannot be everything to everyone, but where your skills/knowledge is sought after, you should look at ways to add value to those who need it. This principle is more of a subconscious one compared to the others, but doing it often and doing it well is a key principle of financial success.

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4. Make passive income with active income.

This principle highlights the fact that every single human on earth has 24 hours in a day. Nobody can get any more than 24 hours. This means there is a limit to the amount of ‘active’ income we can earn. There is a limit to how much of our time we can exchange for financial reward. Making passive income with active income suggests that the build-up of savings from point 1 above should be invested to create a second source of income – passive income. Passive income can be in the form of property investment or stock market investing.

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5. Give back.

Gratitude is a huge principle of financial success. Once you accomplish your definition of financial success, it is imperative that you find a cause to give back to. This is your way of practising gratitude and a way of “paying your dues” back to the universe that gave you the ability and resources to become financially successful. You could find a charitable cause that is close to your heart, or perhaps volunteer some free time in your local community. Whatever it is, ensure you genuinely give back and practice gratitude constantly.

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Be it early retirement, having enough cashflow from passive income or being able to do what you want when you want, financial success has its own set of principles. A person seldom achieves financial success instantly and without following an established set of principles. Financial success is built over time, unless you win the lottery or receive a huge inheritance, and is the result of years of working smart, careful planning and adhering to the above principles along with numerous other principles.

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Photo by Razvan Chisu on Unsplash

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