It’s not all or nothing. The habits you create now reap dividends in the long run.
Motivation is a funny thing – it is typically either fear or greed that motivates people to action.
He did not want to end up like his father nearing retirement, depending fully on a pension and social security; a fixed income that allows no flexibility in a tight budget…along with rising costs for essentials like health care. He was motivated.
“What can I do” he asked himself, “to avoid this?”
She was maxing out her employers’ 401(k) – lowering taxes and getting a match plus growth. She had seen the power of compounding and the time value of money – her parents had financial independence and had built it brick by brick, piece by piece, asset after asset.
She wanted to know, “What else can I do?”
These two young professionals are now ahead of the game for a few reasons – they started motivated, asked lots of questions, built habits, and implemented a plan that gets reviewed as life, work, and business evolves. But the real reason they are financially prepared for anything life can throw at them is that they started young. That gave them a super head start on accumulating assets and will save them from having to play catch up later on.
They did have the same challenges that many young people face; not enough money, time, or education around what their options were at the time. Here are some ways to overcome these challenges:
Acorns grow into oak trees. Bring it down from pie in the sky to what is actually achievable for you right now.
You may not be able to run a marathon right now, but it is a lot easier to go around the block once or twice. It’s relatively easy to start small – it makes it easy to add down the road.
All it takes may be to put $50 per month into a fund that makes sense for your time horizon and risk tolerance. There are many places you can go to get going in a similar fashion. Because of the power of compounding and contributing more and more on a monthly basis, accounts have grown as his family and businesses have alongside it.
The most important piece is not what the money is invested in, it’s what the money is invested for.
Talk about money with your friends, siblings, family members – get a sense of their best decisions, their worst decisions, and any advice they have. Communication is key, and that is especially true if you are married – involve your spouse in everything from bills to taxes to investments. Come up with goals and plans together – your marriage is your most important relationship and that is especially true when it comes to money issues. Build a team of advisors and professionals that works well with you and your family…treat that process like dating.
To make wealth accumulation a priority. Focus on goals, short/medium, and long.
Take advantage of employer-based programs, especially with a match.
Reward + treat yourself – punishment does not work. A nice dinner out occasionally is great. Going out to eat 3 meals every day will drain your wallets.
Watch your budget for leaky spending and cut back any redundancies or wasteful spending.
Think in terms of need vs. want, assets vs. liabilities.
Read! Read the newspapers, blogs, and books – a few personal finance favorites I always recommend are Rich Dad, Poor Dad, Millionaire Next Door, and I Will Teach You to Be Rich.
Whatever it is that motivates you is great! Getting started early, in any form, will be an investment that pays off over your life in freedom, flexibility, and peace of mind. Planning for the future, thinking long-term, and making financial peace of mind a priority will be life-long, and profitable, habits.