They enjoy the simple things in life
Financial success in life has less to do with how much you earn and more to do with a multitude of other factors that influence your relationship with money.
People on modest incomes are quite capable of amassing a sizeable retirement nest egg through managing their money well, while others with high incomes and poor money habits struggle to make ends meet, let alone save for retirement.
Take a look at the private lives of people who have achieved financial success and you will see traits they have in common. It is these traits, rather than their income or the financial circumstances into which they were born, which have led to their success.
They are emotionally stable
Money and emotions are inextricably linked. Money can cause fear, greed, anxiety, stress, happiness and joy.
Financially successful people are less likely to be swayed by emotion.
They take a considered, objective approach to making financial decisions. They don’t spend money impulsively. They stick to their financial goals regardless of what is happening around them.
On the other hand, emotionally unstable people can be prone to spending money to make themselves feel good, or may make bad financial decisions when their emotions get in the way.
They are in a financially compatible relationship
Everybody has a different attitude towards spending and saving, and money matters in general. This is often referred to as a ‘‘money personality’’. Attitudes and values are entrenched in childhood and influenced by significant experiences with money during the course of a lifetime.
Financially successful couples have compatible money personalities or, if they have different money personalities, they talk about and understand their differences so they can make allowances for each other. Financial compatibility doesn’t mean being the same; it means having shared goals and being able to find an agreed approach that recognises each person’s similarities and differences. People who are successful at accumulating money are more likely to get pleasure from the simple things in life that don’t cost a lot, rather than spending money on ‘‘stuff’’.
They value relationships with friends and family and are content with their life.
Dissatisfaction with life can drive spending and risk-taking, both of which have negative financial consequences.
They have self-discipline
A key element of financial success is the ability to save or, in other words, to delay the gratification that comes from spending.
Self-discipline is what gives us the ability to overcome spontaneous emotions and make rational decisions that lead to better long-term outcomes. Those without self-discipline find it difficult to resist spending their savings.
They are proactive in managing money
Most people have no idea where their money goes. Financially successful people don’t necessarily track where every dollar goes, but they have a pretty good idea what they spend money on.
They channel their spending towards things that are important to them, rather than letting it slip through their fingers.
They err on the side of conservatism and caution
Financially successful people make sound financial decisions based on careful thought. This doesn’t mean they avoid taking risks, nor does it mean they act slowly.
They take calculated, considered risks. They have a realistic rather than a highly optimistic view of the world. A bit like the tortoise and the hare, the conservative, cautious decisionmaker can have more success in the long term than the risk-taking, go-getting type.
They have good money habits
Get the basics right and financial success will follow. Financially successful people pay off their credit card every month, or use a debit card instead. They pay their bills on time, keep their debt to a minimum, save for their goals and have spare money on hand.
Psychological factors are just as important as financial literacy in determining our financial futures. It is the interaction of financial literacy and psychology that determines financial capability, that is, the ability to successfully put knowledge into practice and achieve financial success. Liz Koh is an authorised financial adviser and author of
Awa Press. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847.