How to Set Yourself Up for Financial Success

Have you been wondering how to set yourself up for financial success? Establishing good financial habits can set you up for a comfortable, stable life. However, it can take some time to figure everything out. Like any area you want to improve, you need to plan, implement, review, and re-plan. If you are curious about how to set yourself up for financial success, you are taking the first step. Becoming curious about your finances will allow you to find financial freedom. Continue reading to learn more!

How to Set Yourself Up for Financial Success

What is defined as financial success? 

Financial success can mean different things to different people. At its core, financial success is being able to have the relationship you want with money. Furthermore, it’s the ability to reach savings goals, spending goals, and investment goals. If you are wondering how to set yourself up for financial success, that is great. The first step is to figure out what financial success means to you. Remember, financial success is not necessarily making a certain amount of money every year. Rather, it’s the ability to financially support the lifestyle you want.

In general, financial success includes having healthy finances. With well-maintained finances, money is not holding you back. You have day-to-day money for spending and a conservative emergency fund. There are savings building up for large purchases. Your debt is minimized, and retirement is taken into consideration.

Certainly, with healthy finances, you are not buying everything you want. Everything becomes a choice. Would you rather this product or service, or would you rather increase your savings or pay down debt? Whatever you decide, you have the freedom to do what you wish with your money.

What are the four simple habits for personal finance success?

Four simple habits will launch your search for how to set yourself up for financial success. These habits include managing expenses, dealing with debt, building credit, and saving money. Without these baseline habits, financial success may not be an easy goal to reach. It’s important to prioritize these four simple habits in any financial planning:

  1. Managing expenses helps ensure you have more money coming in than being spent. 
  2. Dealing with debt helps minimize lost money to interest. It can also increase your overall budget for daily activities. First, you must manage your debt and minimize money lost to interest.
  3. Building credit, allows you to successfully apply for loans and mortgages. It allows you to form good financial habits.
  4. Saving money provides spending money for larger expenses, emergency funds and retirement. 

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How to set yourself up for financial success

Ready to get into it? Let’s go! Below are various tactics on how to set yourself up for financial success.

Where is your money going? – Track your spending

It is easy to estimate where your money is going. When figuring out how to set yourself up for financial success, you need exact numbers and a budget to compare it against. Look at your online credit card and banking history. Most big banks have a decent organization of their statements. They will help you get a full and real picture of how you use your money.

Services like Mint can help organize all these numbers. They gather all information into one place, by connecting to your online accounts. These services give clear numbers and categories of spending. This gives a baseline of where to prioritize and manage your budget. 

Some typical spending categories include: 

  • Rent or mortgage
  • Utility bills
  • Phone and Internet bills
  • Debt repayments
  • Car and/or public transport expenses
  • Insurance policies
  • Groceries
  • Clothing
  • Entertainment expenses (eating out, movies, theatre, shows)
  • Irregular common purchases (furniture, eyeglasses)

Looking at your historical spending will give you insight into your day-to-day spending. It is a necessary starting point. From here, you can go on and have a life of financial success through mindful spending.

Pay off debts!

It might be easy to jump into wanting to save. However, if you have debt, you have money being lost to interest. Your priority should be to lower debt and minimize lost money to interest payments. The main concern here is that interest accumulates at a much higher rate than any savings account does. For this reason, saving is not a priority when you have significant interest being paid to debt.

Once the debt is brought down and healthy spending habits are established, you are on the right path. Money once used for debt repayment can then be put towards savings. Debt repayment and savings require very similar financial discipline and practice. Use this time to apply healthy financial habits in your day-to-day. You can even remind yourself of the “why” for not wanting to accumulate debt again in the future. This helps to avoid money lost to high-interest rates/payments.

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Create a budget

Now that you understand the need to prioritize debt reduction, we can talk about your budget. You’ve done the work and discovered how you habitually spend your money. Take this information and set realistic budget goals for yourself.

The most popular budget uses the 50/30/20 rule. This budget rule standardizes how you should create your budget. It outlines percentages of net income you should delegate to areas of your life. 

  • 50% on “needs”, like rent and bills.
  • 30% on “wants”, like eating out, paying for a new phone, and any streaming subscriptions.
  • 20% on savings or paying down debt.

This is only a suggested budget ratio. You can modify it to what works for you. There are also many more equally effective budget approaches. The most important thing is to find the right budget for you. Ultimately you need to find a budget that will allow you to spend less than you earn. The goal of a good budget is to also add some money into savings. 

Use credit frequently but with care – Build your credit

Regardless of the status of your credit, you should always be mindful of the figure and work on building it. Making a payment on car loans, mortgages, credit cards, or personal loans adds to credit history, the most important aspect of credit.

While this may sound like the opposite advice from paying down debt, it is not. There is a difference between letting debt accumulate and using credit wisely. Generally, you have a grace period where no interest incurs on a credit card. If you use and repay a credit card before interest can add up, you are building credit history. You do not need to use credit exclusively; you just need to put a small reoccurring payment on it. Be responsible with credit cards and loans. Missed or late payments can negatively affect your credit score and this needs to be avoided for financial success. 

Borrowell is a great free tool to access and review your credit score and credit report. Monitoring your credit score and credit report can help you improve them.

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Save, save, save!

A final element of how to set yourself up for financial success is to have savings. This won’t happen overnight, and you should prioritize paying down debt. Once debt is paid off, you can use all that money to put into your savings.

There are a couple of things you should be aware of. You should always have an emergency fund in case you are laid off or lose work, or any other emergency comes up. Most people say you should have about 6-12 months of cash to cover living expenses in an emergency fund. This can be intimidating. However, you must work towards it. Having an emergency fund contributes to financial success. It allows you to know you are prepared should anything happen. Ideally, all the money you once used towards paying down debt should be used to build up savings. This will allow you to save more quickly.

Even when you are paying down debt a trick to build up savings in RRSPs is to max out an employer’s matching bonus. Many employers will match 4-10% of each paycheck you contribute towards an RRSP set up through them. This is a great way to get additional money put right into your savings. 

Related Reading: Tax-Free Savings Accounts (TFSAs) in Canada: A Complete Guide

Figure out ways to earn more

It is easy to become comfortable with a job and a salary, but this limits your financial success. Sure, you may not need to aim to earn a million dollars a year. However, you may want to seek out new employment, or side hustles if your salary has remained static. As part of your journey to find out how to set yourself up for financial success, you need to be able to seek more money. A lot of jobs will have regular raises, promotions, and inflation increases. Whether these are in place or not, you need to learn to ask for raises when you feel you’ve done extra work or are adding value. Seek out growth opportunities, maybe even take classes to get you into the next pay grade. Always seeking a higher salary expands your budget with additional room for savings. 

Related Reading: Types of Income

Learn about investments and high-interest savings accounts

Have you built up your savings and are you now wondering about your next step? If you have been able to create a budget and stick to it, you are in great shape. If you have had money slowly building up, you are in even better shape. Now is the time to consider how to make your money work for you. There are a variety of GIC accounts that offer high-interest rates. Many people find success in stocks and other investment markets. There are many ways to make savings work for you and grow beyond your initial investment.

How you choose to invest your money is up to you. However, if you have savings, you may want to consider high-interest savings accounts. Only your emergency fund needs to be readily available in a day-to-day savings account. There are locked-in accounts that offer better returns than most day-to-day accounts. Be conservative with how you manage your savings. You do not want to risk it all on investments that promise you millions of dollars but deliver nothing. Ensure you educate yourself on investment choices and are prepared for the risk. 

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What is the key to financial success?

If you have started asking how to set yourself up for financial success, you have started looking for the key to financial success. It is not overly complicated and it is not too hard to learn. Consistency with your finances is the main thing. In the long run, consistency will produce the reward you’d like. No one wants to work longer than they must, many people want to enjoy retirement, and some people want to retire early. Good financial habits are managing expenses, dealing with debt, building credit, and saving money. The longer and the quicker you can do these 4 things, the more financial success you will have. We all dream of that big payout that will solve our financial problems. The truth is, like a diet, finances fall into place when you find the happy medium of intake and output.

Read More: Financial Health Checks: Why You Should Do Them Regularly

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