If you examine your recent past, you’ll discover “moments” in your financial life where things happened. Stuff got done. You hit inflection points. These are the moments where you crossed a threshold or overcame a hurdle.
These “moments” are the points that truly make a difference in life. Any time you make a decision and choose a path, stuff happens. Actions have consequences.
The strange thing about these “moments” is that few people try to create them. Instead, many people are reactive to life events.
“I had a kid, so I started saving money for college.”
“After five years of practice, I realized I needed to start saving for retirement if I didn’t want to work forever.”
If you feel like you’re plateauing on financial progress, maybe it’s time to start being proactive? It’s easy to continue with the status quo, to bury our heads in the sand and to shield ourselves from the risk and pain required for growth.
Finding a new job to increase your income is uncomfortable.
Spending less money is uncomfortable.
But think back to the last “peak” experience you had when something changed? What decision do you make that led to tangible results in your financial life today?
The strange thing is that most people already know what they need to be doing. Like losing weight, personal financial decisions are usually obvious.
But there’s an old proverb “To know and not to act, is not to know.”
Let that sink in for a second.
If you know what you need to do but aren’t doing it, then do you know what you need to do?
If you do know what to do, then why not start creating “moments” for yourself?
Early in my career, I didn’t want to save $1,000 in a brokerage account. It felt like an insignificant sum, plus I owed over $200K in student loans and paying it down was a slog. What could a measly $1,000 do in terms of making me rich? Not much I thought.
Regardless of what felt like the insignificance of it all, I still signed myself up for those automatic payments. I even went one step further and had payroll deposit specific amounts directly into my investment accounts while “setting my salary” much lower.
Looking back with hindsight, I now see that as one of the fundamental inflection points. It was “only” $1,000 at first but over time that’s grown to $2K, $3K, $4K and now it’s well over $10K each month. Those kinds of numbers add up over time, particularly since we’re all so busy that I can almost guarantee whatever decision you’ll make will continue on auto-pilot for several months before you have a chance to catch your breathe and reevaluate.
Want another inflection point? I’ve always had the bulk of my savings in boring index funds, but part of me wanted to strike it rich on a smart investment. This desire led me to invest $10,000 into biotech startup doing exciting things and poised for future success! It seemed like an intelligent decision at the time. I knew people in the specific industry and THIS company was the golden goose. It felt like getting into Google on the ground floor.
What is that $10,000 worth today? Zero bucks. They declared bankruptcy after a few years. If I live to be 81-years-old, it’s pretty reasonable to think that $10,000 would have grown to $320,000 on its own in a boring index fund.
I look back at this “moment” as an inflection point – one where I realized I didn’t need to take on any unnecessary risk to reach my goals. All I needed was to increase my savings rate and let the market forces do the rest of the work.
How can you create your own “moments”?
I could develop a list of ways to create your moments, but I can also distill it into three words: just get started.
Want to max out your 401(k)? Just log on to your benefits account and set it for the right amount. Want to save $3K a month? Set up an automatic transfer. What’s the worse that could happen? Could you bounce a rent check? Will it be uncomfortable when you realize that you’ve potentially screwed yourself? Absolutely. It’ll be all of those things. But you’re a resourceful person and you will adapt. Maybe you’ll have to “borrow” some money from a savings account to make ends meet or perhaps next month you’ll have to ratchet down your contributions but chances are excellent that you’ll be better off overall if you just force yourself to make the change. You can always fix it later.
Joshua Holt is a former private equity M&A lawyer and the creator of Biglaw Investor. Josh couldn’t find a place where lawyers were talking about money, so he created it himself. He spends 10 minutes a month on Empower keeping track of his money and is always negotiating better student loan refinancing bonuses for readers of the site.