"Achieving financial success" may sound like a lofty (and far away) goal. There are many external factors that affect your finances and can deter you from accomplishing what you'd ideally like to: saving up a big enough down payment for your dream home, traveling the world, contributing enough money now to secure the lifestyle you want in retirement later.
Not helping the situation is the fact that financial literacy is at an all time low. Many people don't understand where to start -- or, if they have an idea, they don't know how to execute and take action.
Here's the good news: you only need to understand and put into practice two key fundamental elements if you want to unlock financial success for yourself. These elements aren't complicated or confusing. They're simple and easy to understand.
What are the two secrets to financial success? Saving more money and earning more money.
Doing these two things will help you get started down a path of financial wellness. It seems so simple -- and it is. That's just about all there is to it. The tricky part is knowing how to ac t on these ideas.
Here’s how to get started:
Financial Success via Big Savings
Saving money is more than just socking away quarters and cutting out lattes. While those things can add up and make a difference in your financial picture, saving big percentages of your income is what will really set you up for financial success.
XYPN member Matt Becker wrote up a great blog post on his site that illustrated the power of saving 20%, 30%, even 40% of your income. Take a look and see for yourself what a difference you can make in your financial security -- and overall success -- by cutting your current spending by just 10% and contributing that money to savings instead.
Saving money on a large scale like this may require some lifestyle adjustments -- and you may need to eliminate some expenses and costs that you could take granted or think of as necessary. Start by scruitinizing your current spending. Ask yourself where your money goes each month, and if there's any way you could make a switch to an inexpensive option (or if you could cut the cost entirely).
For example, could you afford to live in a smaller place to save money? Or another alternative living arrangement: what about getting a roommate? How about just renting out a spare room on Airbnb from time to time to help cut the cost of your mortgage?
If you are in a two-person household, is it necessary that you have two cars? Could you walk or bike more, or take public transportation?
When's the last time you called your service providers to ask about the pricing on your bill? Can you switch to a cheaper plan or product? Are there any discounts or options you have for reducing your monthly costs with providers?
These questions are just examples to get you started. The areas of your budget you examine and decide to cut back on will vary depending on your current spending situation.
Regardless, you do need to ask yourself some hard questions, and be honest with your answers about what you really need and what you just want or are spending money on for the instant gratification.
Focus on What's Really Important in Life
Think about ways that you can scale down, and then turn your focus away from material goods to what’s really important: relationships and experiences.
While having a big house, nice cars, and fancy clothes might be nice, it won’t make you wealthy -- it will just make you look wealthy. And there's a big differnce between being wealthy and just looking rich.
That being said, spending money isn't necessarily a "bad" thing. But we can make poor choices in what we use our money to acquire. XYPN member Sophia Bera recently published a blog post that explored the connection between money and happiness, and how spending can make us happy... when it's on the right purchase.
Money should be used to get you closer to your values and your priorities. It can buy you coffees to share with a family member or a close friend. It can grant you access to an amazing, positive experience you'll cherish for the rest of your life.
And when we can get our spending in line with what's important to us -- meaning we only spend on what we highly value and we eliminate expenses everywhere else -- we should have a bit more money left over to save for financial successes and big goals you have like the ability to travel, quit your job to work for yourself, or retire early.
Achieving Financial Success by Earning More Money
Aside from saving more, earning more money is also key to financial success. These two ideas go hand in hand, and it's important to understand that you can't rely on saving alone to get you to your biggest money goals.
Earning more is oftentimes the more difficult and rewarding option -- and likely why most people focus on saving more money first. Yes, it will take work, but it's the only way to fast-track your financial goals.
So how do you go about earning more money?
Putting Ideas into Action to Earn More
Start with where you're at. Work hard and take on more responsibility to earn a raise at work. Do things without having to be asked and perform at a high level (even with the smallest of tasks). Then, when you can show a supervisor that you add considerably value to the company, schedule a time to talk with your boss and negotiate for a raise.
Not sure how to negotiate? This post from XYPN member Katie Brewer can help you learn how to negotiate what you're worth (and why it's so important that you do).
Another option with your current job: pick up additional shifts, hours, or volunteer to work overtime.
If you feel like earning a raise or working more hours isn't possible, you can always earn more money outside of your full-time job. Start side hustling!
When you establish a side hustle, or a side gig, you give yourself a way to make money outside your main job. This can be done in a variety of ways: pursue a hobby, be a consultant in your field, pick up freelancing work, do odd jobs around your community, or help out family and friends using your skill set.
The side hustle options are limitless. If you're not sure how to get your side hustle on, sit down for a brainstorming session. Consider what you're good at doing, what you love to do, and what people will pay you do to (so they don't have to do it themselves).
Earning more money is a key principle in personal finance because your earning potential is theoretically unlimited. While there is only so much you can cut back in your budget, there are unlimited opportunities to earn more if you have the drive and dedication.
The key is to monetize a skill that you have, that people are also willing to pay for. It’s about finding out where skills and needs meet and serving others in a way that helps them out -- while making you some extra money.
Some people prefer to save more rather than earn more, while others prefer to hustle and make more money rather than pinch pennies. But the thing is these two key elements are really two sides of the same coin.
Doing both in tandem will set you up for a strong financial future, so you can handle anything that comes your way and experience financial success.