The Five Fundamentals of Financial Success

Posted by Madison on March 13, 2008

Financial success has little to do with money, stocks, bonds, asset allocation and retirement plans. Sure those matter, but let’s not confuse financial tools with the fundamentals. The foundation is based on preparation, planning and the relationship that money has with other aspects of your life.

Money Vase

Photography: sweet_chicago1

Five Financial Fundamentals

Set financial goals. What do you want your financial situation to look like in 5, 10, 25 or 50 years? Create action plans to achieve your goals. If you want to save $1 million in 50 years, calculate how much you need to put away each month ($140 at 8% return).

Communicate. Get your family on board. If one of you is spending as fast as the other is saving, your net progress is zero. To achieve your financial goals, you must work together. You can take different paths, but they must be headed in the same direction.

Commitment and motivation. Make sure you know why you want to do something. You’re more likely to achieve your goals if they are personal. Take baby steps to keep yourself going and reward yourself frequently.

Plan for the unexpected. We all know that a great financial road map or budget is often derailed with an unexpected expense. Incorporate the unexpected expenses into your plan. You won’t know when they will happen, but it is inevitable that they will.

Don’t delay happiness. Too often, we tell ourselves, I’ll be happy as soon as I pay off this debt… retire… earn more money… Setting goals is great, but there is no reason you can’t enjoy the road to get there too.

Action Plan

The same things that determine success in many other aspects of your life also apply to your financial success. Once your strategy and commitment are in place, you can use financial tools, such as investing and asset allocation, to achieve your success.

See how we’ve built our finances around these fundamentals.

This article is featured in: Carnival of Personal Finance #144.

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Comments to The Five Fundamentals of Financial Success

  1. Don’t delay happiness. Too often, we tell ourselves, I’ll be happy as soon as I pay off this debt… retire… earn more money… Setting goals is great, but there is no reason you can’t enjoy the road to get there too

    I’m glad you put that in there. Too many in the pf blog space act like happiness is the worst of 4 letter words, that if you aren’t sacrificing happiness for money you are an offense to country, freedom and whatever else you hold important.


  2. Great post. You have to have a Success Plan and work it. But I also believe that being in control of your finances should be a lifestyle, not a crash diet. They both fail for the same reason. If you tell yourself you aren’t allowed to have fun ever again, you will trip yourself up.

    Sure be Gazelle, but don’t trip and break you leg!


  3. Success doesn’t happen by chance. It is almost always a planned thing. Planning can also help you see if your goals are realistic or not. If I plan to have $1,000,000 this weekend, setting up a plan will quickly show me that is not realistic.

    No Debt Plan

  4. Great advice to enjoy the journey. I recently became peaceful with my own plan after accepting the debt I had outstanding and stopped constantly beating myself up over it. I created a plan, and instantly felt as if I had taken control of my finances, and my life. Before my plan I was just spinning out of control and constantly stressed out for it.

    Frugal Dad

  5. And don’t forget the magic word: action! The plan is a dead thing without some activity.

    Lost Cause

  6. Excellent post! I too often forget to enjoy the journey. Thanks for reminding me.

    Best Wishes,


  7. Great post. The one thing I would add is to learn from your mistakes. We all make them and they can be your best lessons in life. By all means get annoyed when you make a mistake, but later take the time to review and say to yourself “how can I learn from this, not do it again and make the most of it”


  8. @ Frugal Dad: Glad to hear the plan reduced your stress!

    @ Lost Cause: How could I forget Action Plan?

    @ Andy S: I like the addition to learn from your mistakes. That is incredibly important.


  9. encouraging words to bank on.

    allen olu

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