The Five Pillars of Financial Success
May 17, 2016 - 4 minutes read
Posted by Claire Parker
Managing your “personal” finances for most entrepreneurs is a secondary issue to running a business. This isn’t an issue specific to business owners but my experience has been that running a business makes it very hard to focus on both. I am always looking for hacks for both myself and my clients that will help success in finding financial freedom. I recently listened to a podcast primarily focused around health and nutrition that had an interesting guest called Craig Ballantyne who had a formula for success in his field of expertise. When I listened to what he called the five pillars of success and transformation, it immediately struck me that this formula could also be related to managing your finances.
Here are the Five Pillars of Financial Success based on my own experience and experience with my clients:
1) Plan ahead
It is my opinion that we are not cut out to make long-term plans, particularly those of us classed as Millennials. Behaviourial finance tells us that it is very hard to give up something physical for something intangible like retirement particularly when you have so long to go. I prefer to focus on on the short term or small wins as a way to get started on your path to financial freedom. For example this could be three things that you want to have ticked off your financial objectives in the next six months or just putting money into a bank account for a rainy day every month.
2) Get accountability
It is very hard to do any sort of behavioural change on your own. I would say this, but people with professional help generally do better with their finances as the professionals know the right questions to ask. This is also the simple sum of having someone you are accountable to, constantly checking in as to where you are on your financial journey. We don’t like failing as a species therefore we are more likely to succeed if someone is monitoring our success. This accountability can also be in the form of a financial aggregator such as money dashboard or Pariti. Whatever it is, you just need to be accountable to something or someone so that you are staying true to the plan that you have.
3) Recruit some positive social support
If it was easy to manage your finances I wouldn’t have a job as a financial adviser. Every part of society is trying to get you to spend your hard earned capital or income on their goods and services. It is therefore important that you have a good support network around you for when you are feeling weak with your money and you need to say “no”. It happens to the best of us. It will often get tough when you have to make sacrifices to stick to your financial plan which is why you need people around you to remind you of “why” you are doing it. There is nothing worse than eating healthily and watching your friends or partner eating a a greasy burger right in front of you. This is the same with money.
4) Give yourself a meaningful incentive for reaching your goal
Without reward we will often not succeed in meeting our goals. Whether you are trying to save up for a new business venture or or a holiday to remember it is important that this goal is in the front of your mind at all times. Again behavioural finance tells us that we need constant reminders for actions that are tough. Whether that is a picture of your children or your favourite holiday destination, have this next to you when you make a key decision with your money.
5) Set a deadline
This is a really important element of financial success. Many in their 50s and 60s obviously have retirement as the focused deadline. For those of us that are younger, it is important to set many smaller deadlines to keep us on track. I have just done this myself recently and I’ve given myself 12 months to save up some money for a specific purpose. I have automated it so that the money comes out of my bank without even having to touch it or feel it and hopefully I will meet my target this way. My argument would be to not set deadlines too far in the future because they are much easier to postpone or even worse cancel.
So there you go. I think the above five principles could help anyone to start managing their finances more effectively. For me, it is all about winning the small battles as these lead to behavioural changes that will give you long-term success. It won’t be easy, if it was, everyone would be financially free and secure but hopefully the above can help hack your way to financial freedom.