If I could talk to my 21 year old self about money….
By Clayton Daniel of Fund Your Ideal Lifestyle
As
one from the older end of the Millennial generation (1982 – 2000), I can say
without a doubt the world is changing rapidly.
It’s
crazy to think my first games console was the Atari 2600. Then Nintendo and Sega came along, which
were ultimately supplanted by Xbox and Playstation. VR it seems will likely
take both their scalps.
I
use video games as an illustration of progression. Sometimes I forget I’ve
actually aged thirty three years, but then seeing is believing.
But
this article isn’t about lamenting how my metabolism has slowed down, or how
young everyone looks in bars these days – it’s about what I would say to my 21
year old self about money.
At
21 I didn’t know anything. I could punch out a nasally punk rock lyric to a
room full of rowdy teenagers, but not much more than that. To say I didn’t know
anything about money was an understatement.
Then
at a pivotal time in my life I met an entrepreneur who was travelling around
the world having a grand old time. He bought me the book ‘rich dad poor dad’
and it set my on a path I now find myself over a decade later. That book taught
me my first lessons in personal finance, and I became obsessed.
Absolutely
obsessed. I realized by understanding the language of money, the rest of life’s
problems can get in line. Money is simply transportable power. The more you
control, the more control you have over your own world.
And
my thought process was this – ‘more money equals better, therefore more time
spent learning about money equals better’. Fast forward another twelve years
and I have a degree in accounting, worked as an accountant, then financial
adviser, and ultimately grew and sold a financial planning business.
And
even though I ‘get it’ now, I’ve dedicated my life to understanding it. Again,
I’m obsessed with it so I’m lucky. But what about the 99.99% of people who
don’t dedicate their lives to understanding personal finance? What about
everyone else who knows a little, but not enough? What about my 21 year old
self?
Well,
this is what I would tell my 21 year old self about money before I ever
dedicated my life to understanding it. ‘Get 80% of the results with 20% of the
effort’.
While
we all have heard of the Pareto Principle, have you ever considered using this
principle with money? Everyone thinks they need a PHD in personal finance to do
well – but you don’t. Everyone thinks they must think about their money a lot
in order to get the most out of it – but you don’t. So I’m talking to those
people who want to do better with their money, but can’t be bothered to do so.
And I know, there are a lot of you out there.
So
let’s get to it. How do you 80/20 your personal finance? Easy, use technology.
Outsource your self-discipline to automation. I promise you, money more so than
anything else in life, if you use an automatic system to perform a task rather
than rely on yourself to do it personally, your chances of success go from 10%
to 100%.
So
get your own outcome, and outsource to automation.
Tip
1 – Your salary account should not be your spending account. For
example, if you had two accounts, you get paid into account (a) and
AUTOMATICALLY transfer across to yourself an amount you’re happy to spend guilt
free each week into account (b). Account (b) has a bank card attached, account
(a) does not.
Social
psychologist Roy Baumeister showed unfulfilled desire causes
us decision fatigue. Reduce your desire to spend money in
your account by putting one level of separation between you and your
savings/salary. Less distractions, better outcomes.
Tip
2 – If you want to invest, do it automatically, don’t rely on being
interested enough each week to follow up. Raiz can AUTOMATICALLY receive
regular contributions from your account. How hard is that to set up? Five
minutes? Five minutes ‘work’ upfront equals long term investing with zero
ongoing effort.
Sure
you can get more fancy than that, but start simple. By doing these two things
you are taking care of your money today (cash-flow) and tomorrow (capital
assets). And if you have an automated investment system to think about your
tomorrow, your only focus is guilt-free spending today .
By Clayton Daniel of Fund Your Ideal Lifestyle
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