What is financial success? The American consumer’s definition of financial success seems to be changing by year and varying by age. That’s what broker TD Ameritrade learned from a recent survey.
< Significantly, 39% of survey participants now define “financial success” as being debt-free.
Another 29 percent defined “financial success” as being able to save money for long-term goals such as education and retirement.
The definition varied significantly by age. For example, 51 percent of those in the 65+ age group defined financial success as being debt-free. Only 30 percent of those in the 18-34 age group adopted that definition. My guess is that the older Americans are more likely to be debt-free when surveyed. This made it easy for them to equate that to financial success.
The younger adults are more likely to have considerable debt and therefore don’t want to use a definition that immediately brands themselves not successful. I’ll bet that many of them rate financial success as having a good credit score. That’s a sad way to look at it.
What surprised me was that there was no apparent mention of measuring financial success by net worth. That metric takes into account your level of debt but as a factor compared to your assets. Many baby boomers are still carrying mortgages but may have substantial equity and a downsizing plan to use that equity for a mortgage-free retirement. A substantial positive net worth enables this and results in a debt-free retirement. I would consider that scenario financial success.
If you were asked to define “financial success” as a survey participant, how would you answer?