Angela Lee Duckworth's book Grit endorsed the benefit of forming good financial habits
“The distance between your dreams and reality is called, action” - Unknown Author.
Over the past year, I have tried to read as many finance-related books as I could; some were specifically about money, others not so much. But what I found interesting, was that even though they may have been tackling different subject matters, I found there was one common theme running through all of them.
I thought I would share it with you, because I wanted to show you how I think it’s directly related to your finances, and the impact it can have on them. The one thing that kept jumping off the pages was that to be successful in anything in life, you need to take action.
But here’s the thing, the action you take, doesn’t have to be very big. It doesn’t have to come from winning the lotto, or developing and starting a business and selling it 12 months later for millions etc.
The majority of financially successful people I come across, became that way because they consistently take action in a number of different areas. The sum total of which produces terrific results. That’s their secret if you want to call it a secret. They simply do a number of different tasks consistently and correctly, and over time they produce excellence.
One of the books I read this year, was Grit by Angela Duckworth.
She recalls how she read a study about competitive swimmers called, The Mundanity of Excellence. And the conclusion of the article was that incredible achievements are the aggregate of countless individual elements, each of which are ordinary.
The sociologist who completed the study, Dan Chambliss, said that incredible performance and results are a result of dozens of small skills or activities which have either been learned or stumbled upon, but soon become a habit, and when they are combined, amazing things begin to happen.
People who are financially successful do exactly the same thing. They share the same traits and habits, where each is pretty ordinary and mundane in their own right but when combined, incredible things happen, over time.
Paying your bills on time, creating and maintaining a monthly budget, paying yourself first and saving that money before anyone else gets their hands on it, spending less than what you earn, not taking on needless debt are all examples of very simple tasks you can do, but when done together, the results can be great.
Saving a million euros you might think is a big ask, and some might think they would need to inherit, or win money, or have to save an incredible amount each month to reach that number. But, if you were to save €5.62 into an account every day, and the average annual return was 8%, there would be €1,000,000 sitting in your pension account in 40 years’ time. This is something people in their 20s in particular must be told, and made aware of.
After tax relief, the amount a 25-year-old needs to save is just €5.62 each day, and if they did, they would be a millionaire when they are 65. If an employer contributed on their behalf as well, they could save even less if they wanted to. So, you don’t have to do anything extraordinary to become a millionaire, just consistently save a little over €5 per day. It’s not an incredible sacrifice, so I’m not sure why more people aren’t doing it.
And here’s the thing: saving that amount of money, over that period of time, you would have only contributed €82,000 but yet there is €1,000,000 in your retirement account.
Another book I read during the year was The Answer by Barbara & Allan Pease.
They rightly said, the reason people don’t do more with their lives (and in a financial context, that is largely going to be not saving enough or having to work longer than they want to) is because they are always “busy getting ready to get ready”.
They said, you have to start now, because it isn’t now you will be disappointed you never did, but in 20 or 30 years’ time, when you won’t have the time to make up for that lost ground.
I also re-read Unlimited Power by Tony Robbins, and it is a masterpiece.
He says that if you don’t do what you need to do, you will end up responding to someone else’s plan for you, and guess what they have in plan for you? Nothing.
As Robbins says, “Knowledge is only potential power until it comes into the hands of someone who knows how to get themselves to take effective action.” And he goes on to say that the one thing that separates very successful people from the average person, is their ability to take action.
The longer you go without doing something, even if it is a relatively simple task, like opening a new savings account or paying off debt in a quicker way, the harder it will become to do. And the less impact it will have on your finances. Every month, you delay overpaying on your mortgage is another month’s interest you will never be able to recover – it’s gone and it’s not coming back, so don’t delay any further.
And if you do one thing in 2018, that will improve your finances, whatever that is for you, just follow through and take action - please.
Liam Croke is MD of Harmonics Financial Ltd,
based in Plassey. He can be contacted at firstname.lastname@example.org or www.harmonics.ie