What is financial success?

Financial success is possible, likely, even inevitable for people who work hard and make the right decisions (it also helps to live in a free country).

So what is financial success?

If we asked 100 different people to define success, we’d hear just as many different definitions. Financial success is no different. Our personal definitions call for varying levels of wealth, but there are several key similarities.

Financial success is:

• increasingly common
• provides security
• encourages opportunities
• good for everyone

Financial success is about freeing yourself from the paycheck to paycheck lifestyle. Building wealth and eliminating debt frees you to make decisions based on what is best for your family or simply based on what you want.

When people make decisions based on what is best for them, everyone benefits. How’s that, you ask? Economists have long understood that financial success is not a zero sum game—your neighbor does not have to lose money in order for your to earn more.

Everyone benefits

Instead, people voluntarily exchange their labor or their creations for something they value more. Both parties benefit. For example, let’s look at the relationship you have with your employer.

You value your time and we can put a number to this value. You’ve agreed to work a certain number of hours for your salary. Now, you could decide to do something else with your time, but for the moment, you are willing to trade your labor for your current salary.

From the employer’s perspective, they are getting more out of this relationship than your stated salary. Your employer takes your labor and combines it with the labor of other employees.

This pooled labor combined with intellectual or mechanical assets allows the business to create something worth far more than the sum of the employees’ salaries.

What financial success requires

In the end, financial success depends on our savvy use of our time, intelligence, and our assets. Much like your employer, you need to evaluate the impact of your personal and financial decisions.

Financial success does not necessarily require that you deprive yourself, but it does demand that you remain conscious of the tradeoffs you are making.