What’s shedding a few kilos got to do with building your nest egg?
Recently, I’ve been meeting a lot of new clients around the country and hearing about their individual financial goals. This has made me think about how we set and commit to goals in general. One of the most common goals people set is to do with health and well-being. Could there be a parallel between setting health goals and financial goals?
We’re often told by health experts that losing weight, or just being healthier, is easier than we think. Improving our diet and exercise regime comes down to small changes rather than an extreme lifestyle overhaul.
When people commit to a weight loss or lifestyle goal, they willingly change a few eating or physical habits to reach it. They make healthier food choices, like swapping white bread for wholegrain, soft drink for water or cutting back on sugary . They might choose to take the stairs instead of the elevator, walk to the shop instead of drive, or get off the bus two stops earlier and walk the rest of the way.
Now, all these things seem relatively easy and painless. We’re not talking complete denial or adopting a strict Paleo diet. And we’re not talking about signing up for a marathon. Rather, it’s about making simple substitutions that have a big pay off – better health and wellbeing.
So, what do healthy food swaps have to do with building wealth? Ok, here’s where I come to my point. Why don’t we adopt this same mindset when it comes to saving money?
If I asked you to stop spending money on entertainment or eating out for the next five years, you’d tell me I was being ridiculous. And if I told you to go for a whole year without purchasing any new clothes, you’d tell me this would be completely unachievable.
But, what about if we made smart – and small – substitutions to hit our savings goal? Instead of eating out once a week, we could swap to once a fortnight. And instead of choosing an expensive restaurant in the city, how about a local BYO? Buying clothes only in sales or shopping in more affordable stores or online are other small changes we can make without causing too much pain.
Because small sacrifices can add up to big benefits over time without adversely affecting your quality of life. Here’s an example:
Couple A commits to saving $100 every week. They set this savings plan up as a direct debit so it happens automatically without them even thinking about it. Fast-forward 10 years, and (based on 7% interest), they now have an incredible $90,000. That’s enough for one hell of a holiday! Did sacrificing $100 a week – or $50 each – hurt them? Maybe a little. They may have forgone a few dinners in Italian restaurants and instead made their own pasta at home, but it didn’t cripple their way of life. It was a goal that was achievable and gave them a big reward – more wealth to invest and enjoy.
So often, we postpone starting a savings plan until another day because we think we just can’t afford to sacrifice any cash flow. But if you flip this on its head, and focus on the end benefit, I’m sure you’ll find that making small, manageable ‘spending swaps’ really is possible.
