A few days ago, I posted an article entitled Financial Success Isn’t “Impossible”. The piece argued against the common prevailing notion in our society that financial success is completely out of the reach of most people, particularly those under 40. I used my own story as a backdrop for this discussion, and went on to point out a bunch of common strategies that I see people overlooking all the time, often at the same time that they’re buying into the notion that financial success is impossible.
I received a fair amount of feedback on this article, most of which boiled down to a few key points that I felt were worth addressing.
What Does ‘Financial Success’ Mean?
The first big issue with the article is that “financial success” clearly means very different things to different people. To some, financial success might mean freedom from debt. To others, it might mean full financial independence.
For me, the definition is really simple. Are you in notably better financial shape than you were a year ago? If so, then you’re financially successful.
How do you measure your “financial shape”? It really depends on what your individual goals are, but for me, it simply comes down to net worth. If I add up the value of all of the things that I own and subtract from it all of my debts, what’s that number? Ideally, that number is higher than it was a year ago. If it’s higher, then I’m achieving financial success. If it’s not, then I’m making some missteps and I’m not achieving financial success, especially if this pattern keeps up.
That level of financial success is obtainable for virtually every American. There is almost no one out there in a situation where they could not improve their net worth over the course of the next year, if they chose to take action to do so.
The issue, of course, is that many people hold an arbitrary definition in their minds of what financial success is. If “financial success” means “achieving a specific net worth” or “owning a specific possession,” then it’s very likely that financial success is out of reach for you. If you’re making $30,000 a year and you define financial success as having a net worth of $5 million or above, yes, financial success is going to be hard to come by. If you’re making $40,000 a year and your metric of financial success is to own a mansion in the rich part of town, then you’re very unlikely to be financially successful.
The problem is that you’re defining success in terms of other people, not yourself. The only fair way to judge success is by using yourself as a measuring stick. Have you taken steps to put yourself in a better situation than you were in before? That’s all that matters.
If you wish to judge “success” by whether you can defeat someone in a 100 meter foot race after giving that person an 80 meter head start, feel free, but that’s not going to give you any sense of improving yourself or any route to meaningful improvement.
If you think that financial success is impossible, start by changing your definition of “financial success” to something more realistic – being in better financial shape than you were a year ago, ideally significantly better financial shape.
If you have $100,000 in student loan debt, aim for $95,000 by year’s end. That’s financial success. In fact, you’re financially successful if you simply make it a healthy way toward that goal.
If you have nothing in your emergency fund, aim for $200 by year’s end. That’s financial success.
If you have a net worth of negative $100,000, aim for a net worth of negative $80,000 by next July. That’s financial success.
Financial success for some might be having $5 million in the bank and a house in the rich part of town with a Mercedes Benz in the driveway, but that’s only one definition of financial success, and it should probably be someone else’s definition. Figure out what financial success means in your own life and aim for that instead.
The ‘Head Start’ Problem
One enormous issue that comes with measuring your financial success against the standards of someone else is that you run right into the “head start” problem.
How can you realistically compare your financial state to someone else who was given a huge inheritance? You can’t. It doesn’t matter what you do financially, you’re not going to compete with someone who opens up a $1 million check in the mail for no effort of their own.
How can you realistically compare your financial state to someone with a killer career earning the big bucks? You can’t. It doesn’t matter what you do financially, because the only way someone with a $30,000 salary is going to have a bank account comparable to someone with a $300,000 salary is if that high income person makes some truly foolish moves. They can easily save more than you earn.
These are the people I’m talking about above when I say that you’re racing against them in a 100-meter dash and they start at the 80-meter line. You’re not going to win, even if you’re the best sprinter in the world.
The truth? Things will never improve as long as you keep accepting that the race is on their terms, not your own.
The only race worth running is against your prior behavior. When you strip away the advantages (and disadvantages) that other people have, you’re left with nothing but yourself. Can you do better than you did yesterday?
Getting rid of comparisons to others eliminates the “head start” excuse entirely. You can no longer claim that the reason you didn’t succeed is because someone else had a huge advantage that you couldn’t compete with, or that the deck was stacked against you. The only comparison for success that actually matters is one that has the deck equally stacked against them.
The only way you defeat that person and win that race is by committing to better behavior in your financial life. Period.
Someone else’s head start is never a reason for you not to do your best.
Your Own Head Start
At the same time, the reverse is true. Your own head start is never a reason to take it easy.
Too many people in life find themselves starting out in a situation where wealth and a great career are easily within reach for them. Perhaps they were born with a silver spoon, or maybe they were born with stupendous talent, or maybe it just comes easy. Whatever the reason, it comes easy for them.
The same challenge goes for people in this situation. The only competition for success that really matters is the one looking you in the mirror in the morning. That’s the person that you need to beat. If you can’t surpass your earlier efforts, then you’re not successful on a personal level. You might have more money and more plaudits and more respect than others have at the moment, but if you’re not putting in the effort to achieve success by doing better than you have in the past, you’re letting yourself down.
It’s really no different than going to the gym and eating healthy foods. A guy that weighs 400 pounds might be a huge success if he started at 500 pounds. On the other hand, a guy with perfect genetics that just stands around all day and feels his muscles slowly atrophying might look more successful than the 400-pound guy, but is he, really?
Your Own Race
Most people have a mix of advantages and disadvantages. I was born poor. I went to a public school that was strapped for money. I had 15 surgeries during my childhood and spent, by my count, several months of my childhood in the hospital and many more recovering at home from various things. I’m deaf in one ear and basically blind in one eye. In many conversations, I have to do a bit of lip reading to follow what’s going on, or else tilt my head with my good ear directly toward the speaker. My balance is comically bad.
At the same time, I was born to two parents who really loved me. They worked hard to give me educational opportunities and encouraged me when I needed it. I have some demographic advantages, too, that are impossible to deny.
All of those things add up to a situation that’s really incomparable to anyone else. I have some big advantages. I have a number of disadvantages, too. How can I possibly compare my success to anyone else in any meaningful way? I can’t. All I can really do is compare it to myself, because when I compare my situation today to my situation yesterday, the thing that really distinguishes the two is effort.
I’m running a race against the person I was a year ago, and the person I was five years ago, and the person I was 10 years ago. I can measure that race along any line that I care about – finances, relationships, physical fitness, whatever. Can I win that race? If I can, then I’m living a successful life.
To me, financial success isn’t hitting some arbitrary net worth number. It’s about being in better financial shape than the poor guy I was a number of years ago who was scared to death about how he was ever going to take care of a baby. It’s about being in better financial shape than the guy I was a year ago, too. If I can top those guys, then I’m financially successful.
The Trick Is To Stay Successful
You might be thinking that my definition of financial success is too simple, that it’s easy to be successful if you’re just comparing yourself to your low point.
I don’t feel successful because I’m in better shape than I was at my low point. I feel successful because I’m almost always in better financial shape than I was a year ago. That race is hard. That race is a marathon. Yet, that race provides rewards like no other.
At my low point, my net worth was more than $100,000 in the hole. A year after that, I was approaching a zero balance net worth due to some absurd efforts. Clearly, I’m doing well, right?
Well, now the race is starting over again, and I’m no longer comparing myself to that chap that was $100,000 in the hole. Now I’m looking at myself when I’m about to break even and I’ve already done a lot of the “low hanging fruit” to get to that point.
So, I win that race and a year later I find myself with a net worth of $30,000 or so. It starts over. That’s my new opponent. Can I do better than that?
The reality is that success in life isn’t a sprint, it’s a marathon. You might sprint at first so that you can feel a quick success, but lasting financial success is about results year after year.
It’s not about big flashy bursts. It’s about adopting better habits in your own life, ones that are sustainable, so that you can keep building financial success, brick by brick. It’s all about doing what you can to ensure that you’re winning that race against where you were last year, and hopefully where you were last year is ahead of where you were two years ago, and hopefully where you were two years ago is ahead of where you were three years ago, and so on.
If you keep doing that, and you keep trying to put a little gap between where you are now and where you were a year ago, you are financially successful, period. If you keep doing that over a long period of time, doing better than where you were a year ago, you’re going to be more successful that you could have possibly imagined (well, within the realest of reality, because a billion dollars isn’t going to fall out of the sky) compared to where you’re at.
That is success, nothing else. You’re racing against you, not Jeff Bezos, which makes it easier, but you never let up, which is where the real challenge is.
But My Life’s Still Terrible…
You have fresh air to breathe. You have water to drink. You have access to a wider variety of nutritious foods than almost anyone who has ever lived. You have an infinite supply of entertainment in the palm of your hand and instant to tons and tons of people, the vast majority of the people you care about.
Your life isn’t terrible at all. In fact, your life is strictly better than virtually everyone who has ever lived on earth. You have a better day-to-day life than the emperors of Rome.
Your life is “terrible” only in the context of wanting even more. Rather than looking at what you have, you look at what you don’t have.
Start intentionally turning your gaze to what you have rather than what you do not. You have your health. You have your relationships. You have access to fresh water and food. You have a roof over your head. You have clothing. You have access to endless entertainment. You have nearly unlimited tools for communicating with other people.
That’s not a terrible life. If you see that life as terrible because you wish the roof over your head was a little bigger, that seems like a foolish response. If you see that life as terrible because the screen you use to look at entertainment with isn’t as big as you want, that also seems foolish. If you see that life as terrible because you have to work sometimes, that, again, seems foolish. For almost everyone, the enormous bounty of what you have completely overshadows the things that you don’t. People just tend to focus on the things they don’t have. They don’t look at the glass 90% full; they obsess over the glass 10% empty.
If you can shift your perspective to the glass 90% full, you begin to see financial success as what it is – a securing of these good things and a tool for opening more doors for you. A bigger roof over your head doesn’t really matter. A bigger screen in your pocket doesn’t really matter. Something flashy to impress someone else really doesn’t matter.
What matters is that, even if a calamity happens, you still have that roof over your head. You still have food in your belly. You still have your friends and relationships.
And if things go well? Maybe you can stop working, or maybe you can move onto a different challenge that seemed impossible just a few years ago. The opportunities are wide.
My Own Financial Success
For me, my own picture of financial success is being able to retire a little early with Sarah and enjoy most of our fifties together doing fun things. I’m doing everything I can to keep us on that path.
There might be an unexpected event between now and then – there probably will be, in fact. Maybe we won’t be able to retire early, or maybe life will throw something else at us. Who knows? I do know that we’ll be able to handle a lot of bad things, though.
Am I retiring at 40? No. If I judge “success” as being “retire at 40,” then I’m an absolute failure. But that’s a silly thing to judge my success and failure by.
Do I have $10 million in the bank? No. If I judge “success” as being “eight figures in the bank,” then I’m an absolute failure. But that’s a silly thing to judge success and failure by.
What actually matters in terms of success and failure is the effort I put in and, to a lesser extent, the results achieved from those efforts. I know that if I work hard at my finances, no matter what happens, I’m going to be better off than if I had put in no effort at all. If something bad happens, so be it. If something good happens, so be it. In either case, my financial efforts have put me in a much better place than I would have been had I not put forth any effort at all.
To me, that’s financial success. Financial success is simply putting forth consistent financial effort so that you’re in a better financial place than you would have been without that consistent effort. Nothing else matters, because there’s nothing else you can really control.
Don’t Tell Me You Can’t Achieve Financial Success
When I hear someone say that “financial success is impossible,” I hear one of two things. One, they’ve decided that financial success has some arbitrary meaning that someone else has defined for them and they’ve subscribed to rather than looking at their own efforts for the definition of financial success. Two, they’re not putting forth any effort in achieving financial success.
For the first part, remember that the only meaningful definition of financial success is putting yourself in a better financial place than you were in the past. Do you have less debt? Do you have more money in savings? If you’re nodding yes, then you’re financially successful. If you’re able to keep that up over a long period of time, consistently doing better than your recent past, then you’re very financially successful.
Don’t worry about what others decide financial success is. Financial success isn’t a huge McMansion – that’s someone else’s life and someone else’s definition. Financial success isn’t having a ton of money in the bank – that’s someone else’s life and someone else’s definition. Don’t let someone else define your success.
For the second part, if you’re choosing to put forth no effort to improve your finances, you can’t expect your finances to ever get better. Your financial state won’t magically get better if you don’t do anything about it. If you want to have fewer debts, if you want to have money in the bank, if you want to be able to replace that car without hoping that you can get a car loan, then you need to start putting some effort into it. You need to apply a lot of these basic tactics, for starters.
Effort is the single key ingredient in financial success, or any kind of success. If you work hard and don’t find success, you either need to look more carefully at where your effort is going or else reconsider your definition of success.
Never, ever judge your own success by the circumstances of someone else’s life. It will either make you frustrated or make you complacent. Instead, use your own past as the metric for success.
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