In a world of Afterpay, same-day delivery, and on-demand streaming, instant gratification has become a modern-day expectation.
We are conditioned to get everything we want now, or at least in 24 hours via express shipping. I can understand, then, how hard it is for people, especially young people, to resist the urge to splurge – and save or invest instead.
But as the saying goes, good things are worth waiting for.
When it comes to building wealth, this is absolutely the case. Creating the kind of financial security that lets you live well and retire comfortably doesn’t happen overnight.
The money marathon
The truth is, there are no real “get rich quick” schemes (at least not without significant risk and the possibility of major losses). And while it takes patience and discipline to delay spending today, long-term investing shows that the reward is well worth the wait.
For example, if you invested just $1,000 in the Australian sharemarket and earned an average return of 9.8 per cent per year (based on a historical average), that small amount could grow to over $17,000 in 30 years, thanks to the power of compounding.
I always find it interesting that the people who often end up the most secure in life are the ones who have simply stayed on the sensible money course. They’re financially focused and have built up their financial fitness to go the distance.
5 ways to Improve your financial fitness
It’s never too late to work on your financial health and commit to making smarter money choices.
Even if you feel like you’ve joined the money marathon a little late, that’s OK – what matters is that you start training now. Just like physical fitness, financial fitness is built through consistent effort over time.
Here are five tips to get into better financial shape:
Get a money mentor
I am a big supporter of having a ‘money mentor’ – they are like a financial coach – someone who motivates you and keeps you on course.
The person could be a professional financial planner or just someone you respect and admire for their money smarts, like a family member or a finance expert you follow online.
Having a money mentor can help you to plan your financial future, avoid making costly money mistakes and stay focused on your long-term goals.
Build up money muscle
Just like you build body bulk by increasing your weight capacity at the gym, you can build up your money muscles over time.
Start with small, achievable financial goals, like building an emergency fund, paying off high-interest debt, or committing to saving a percentage of your income every month.
Then you could ‘add more weight’ such as getting a second job to save for a home deposit, or smash down your mortgage faster. You may also want to engage a financial planner to help you make plans for your lifelong financial security and goals.
But if you are thinking about investing in the sharemarket, just remember the words of the great Warren Buffett – the ‘World’s Best Investor’:
“Most people shouldn’t be active investors.”
By this he means that unless we are very clued up when it comes to share investing, then we are wise to leave it to the professionals who work with money everyday. So low-fee index funds and focusing on avoiding bad investments, rather than trying to find the next big winner is a safer way to grow money.
Review and correct
Most financial mistakes are driven by emotion. Fear, greed – even boredom – can lead to poor money decisions.
It’s like stress-spending to feel better. Panic-selling during a market dip, or rushing into a property purchase out of FOMO, rather than making a well-considered decision is the investment equivalent.
Take the time to review your financial behavior, just as an athlete analyses their performance to improve. Often, the most powerful changes come from being honest with ourselves and committing to do better.
Stay focused on the finish line
Wealth doesn’t build in days – it builds in decades. The market will rise and fall. Life will throw you curveballs. The key is to stay focused… financial freedom, security, and peace of mind await as long as you keep running and stay on track.
And the entire time you are on track, compound interest is doing just that … compounding.
Run at your own pace
It’s easy to compare your financial journey to others but remember, everyone runs a different race.
Some people get a head start through family support or inheritance. Others face setbacks due to bad luck, poor decisions, or broader economic challenges which they can’t control.
You might notice some friends sprinting ahead of you but then come crashing back thanks to taking too many risks with their money.
So focus on running at your own pace. Knowing and respecting your risk profile will help you make decisions you are comfortable with and doesn’t keep you up at night.
The money mindset
In today’s “buy it now” culture, practicing delayed gratification over instant indulgence is underrated. But this mindset helps us to build wealth over time.
Just remember, ‘slow and steady wins the race’.
Good luck.
