Have you reached financial success? Don’t compare to others

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In today’s fast-paced world, financial success is often seen as a key indicator of personal and professional achievement. But what does it truly mean to be financially successful, and are you stepping onto a slippery slope by comparing yourself to others when you gauge your own success?

Here’s why it’s important to define what financial success means to you, and then create a plan that aligns with your values and goals to help you achieve it.

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Financial success is a personal concept that looks different for everyone. Some people will measure their success by their net worth, which is simply the value of their assets minus what they owe.

Others focus on their income and savings rate. While income is important, a higher savings rate indicates that you’re managing your expenses in a way that allows you to prepare for future financial goals.

There are also less concrete ways to gauge success, like comparing the amount of debt you carry against your income, how diversified your investment portfolio is, whether your emergency fund can tide you over for at least six months, and how well you understand financial concepts to manage your money effectively.

Ultimately, financial success should improve your quality of life. It’s not just about accumulating wealth; it’s about finding a balance that lets you enjoy life, pursue your passions, and maintain a healthy work-life balance.

Comparing yourself to others who have different circumstances, like family background, education, career choices, or luck, can lead to unrealistic expectations and a lot of stress. Additionally, judging your success based on appearances is misleading, as people often showcase wealth through material possessions without revealing how much debt they have. Social media has been shown to contribute to feelings of inadequacy by portraying an exaggerated reality, with people sharing their successes and hiding their struggles.

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Constantly comparing yourself to others can lead to anxiety, stress, and depression. Keep in mind that financial success is subjective; what matters to you might not matter to someone else. Focus on what you can control, set clear goals to know if you’ve reached your desired level of success, and remember to celebrate your achievements, no matter how small they may seem. As they say, sometimes the small stuff really is the big stuff.

To define your financial goals, start by identifying what financial success means to you. Does it mean owning a home, being debt-free, saving for a comfortable retirement, or having enough money to retire early and travel the world? Everyone’s picture of success will look different – you and your partner might even see things differently – but by setting SMART goals that are specific, measurable, achievable, relevant, and time-bound, you’ll have the clarity to stay focused and motivated.

Once you have firmed up your goals, create a plan for how to achieve them.

If you don’t live according to a realistic household budget, start by creating one that allows you to cover all of your expenses, including debt payments, discretionary spending, and money for savings. Regularly review and adjust your budget to stay on track and to adapt it if your circumstances change.

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As you work on your plan, improving your financial literacy will help you make informed decisions and increase your money skills. November is Financial Literacy Month in Canada, making it the perfect time to explore books, online courses and podcasts, and to find personal finance experts to learn from.

An emergency fund is a crucial component of financial success. It provides a safety net in case of unexpected expenses, such as medical emergencies or job loss. Aim to save at least three to six months’ worth of living expenses in a readily accessible account. If you decide to invest your emergency savings to help it grow faster, consider working with a financial adviser to develop an investment strategy that aligns with your goals and risk tolerance.

When it comes to debt, avoid comparing what you owe with national averages or what friends and family say they owe. One person’s $3,000 credit card bill can be as insurmountable as another person’s $30,000 of credit card debt.

Instead, focus on permanently paying off what you owe, and when it comes to credit cards, aim to pay them off to a zero balance every month. Carrying high levels of debt can lead to poor financial decision-making and ongoing financial stress. It’s crucial to challenge the notion that debt is a normal part of life and prioritize the wise use of credit and responsible debt management as part of your overall money plan.

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By defining what financial success means to you and creating a plan that aligns with your values and goals, you can look forward to a stable financial future. Regularly track your financial progress to ensure you are on the right path and don’t delay seeking professional help if you think you need it, especially when it comes to debt. It’s not about keeping up with others or following the same path; it’s about building a financial future that works for you.

Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 28 years.

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