When we look at the big picture of financial security, it can be absolutely daunting. It is a common fallacy that large sums of money are needed to be able to invest for the future. If you can understand the concept of making small choices, on a regular basis, in order to achieve big gains in the future, it becomes easy to change this mindset. Here are some simple ideas of small choices that can mean big gains.
The pace of modern life is so hectic that, often, it is all we can do to just hold on for the ride. One of the greatest threats to your future financial security is ignoring it. The future isn’t going to take care of itself; you have to take action regularly to make sure you can continue to live the way you want, for your whole life.
The time to start is now. I know, I know; it’s hard! It’s also a bit scary! But you need to get your head around the idea that your financial future is in your hands.
In fact, mindset and attitude head the list of small choices. You can choose to ignore your future financial security or you can choose to be proactive about it. Many of us choose to ignore because it all seems too hard and scary. If you can choose to develop a more positive attitude about your finances, you’ll find it easier to make a few small changes in your saving and spending. It’s these small changes that are going to make all the difference later on.
Ever heard the scenario about whether you would rather have a million dollars or a penny that is doubled every day for 30 days?
Most people go for the million, until they realize it is probably a trick question. In fact, the penny a day would yield you five times that amount. This simple scenario shows that small things can build to significant gains. Unfortunately, research shows that most people would take the million dollars, spend it all and then wonder why their situation hasn’t changed!
The secret to financial success is actually saving small amounts regularly, even just $5 or $10 at first, and then putting these savings to work for you. Your money works for you when it is earning you interest or adding value so don’t leave it sitting in your everyday bank account. This also puts the temptation to spend it, right under your nose too!
So what changes can you think of to get your financial ball rolling?
Here are some ideas of small choices that can translate into big financial gains in the future. Remember, that is what you are working towards – a secure financial future for you and your family; this is not about short-term gains.
Create a Budget
You have to have a budget to know where your money comes from and where it has to go to. A budget is like a personal financial plan; without it, you are unfortunately doomed to financial hassles, unless you have so much money, it doesn’t matter what you spend!
Your budget will tell you how much you have left over after paying bills; this is how much you can save. If your budget tells you that you’re spending more than you earn, you MUST cut your spending somehow. Sure, it’s going to be tough, but you owe it to yourself to get your spending under control.
Problem spending areas become obvious when you look at your budget. Find where you over-spend and decide to cut back. Remember, small changes make for big results, so just shave off a little from several spending areas to lessen the pain. Look for lots of little ways you can save a few dollars here and a few dollars there.
Save With Each Paycheck
Promise yourself that you will save something out of every paycheck. Budget for this, then make sure you pay yourself first. Arrange for your savings amount to be automatically deposited into a savings account. This way, you never see it and what you don’t see, you won’t miss. Trust me, I have found that this really works.
Define Your Wants and Needs
Figure out the difference between your wants and needs. Spend most of your money on what you ‘need’ to live. This means accommodation, food, utility bills, basic clothing and health care. Keep your spending on ‘wants’ to what you can afford; you know what you can afford because your budget tells you. See how simple finances are when you have that budget……..and follow it?
Everyone has debts. It is usually debts that cause the most financial problems. Getting your debts paid off, or under control, is a good saving strategy because it’s saving you dead money which we call interest. Attack your credit card debts fist; they usually carry the highest interest rates anyway.
Grow Your Money
Put your money to work. Start with a simple interest-earning savings account and when you have a healthy balance, look for ways to make your money work harder by earning you a higher interest rate or by investing. Talking to a financial advisor is often a good idea at this point, rather than trying to go it alone.
Remember: You owe it to yourself to make a commitment to stick to the small choices and changes you have identified. Keep looking for more ways to free up some extra cash; put up with some short-term pain for the big gains you will enjoy later on.
So, what kind of changes have you had to make to get ahead financially?
You know what I like about this post? It’s simple. We blow it out of proportion sometimes and make a big deal out of it, but really…just start saving,stop spending, get out of debt. Simple! Spend less, save more. Just like exercise: eat less, exercise more. Simple rules that are simple to follow. Well, sort of simple…
Things are a lot less complex than people think they are. It is simple. Spend less, save more, that’s it. I find when things are simplified for people they are much more successful at achieving them.
I totally agree with you that small changes make a huge difference. You just have to change your mindset.
That isn’t always easy though. People’s mindsets are ingrained and have been since they were young. It is hard to undo that all but it isn’t impossible.
The biggest change ever, for me, was to realise (existentially) that small amounts have large effects. This can lead to change in thinking and habits that completely trasforms one’s financial destiny. I know!
Once I realized this my whole like improved. Small changes to diet and exercise made me healthier and small changes to how I manage my finances has made me more financially secure. It really does work. I am glad you too have realized this. You will be much better off because of it.
Theses tips have been sad over and over and over again. But I feel many people don’t realize that the tips you just provided are good foundation to get you started to secure your financial future.
You’re right. Many don’t.They think things are a lot more complex than they actually are.
Problem is we are never clear about the outcome. A penny that doubles every day is a case when we know the outcome, but whether this stock will give me 10% upside or down side, or real estate market will rise or fall is a choice question with no definitive outcome. Hence, people struggle.
Good point. There are some things that are unpredictable. However I don’t think this should stop you from saving or investing. It is still important to do. If anything, you just have to be as conservative as you can be.
Personal finance is fairly easy, thanks for the reminder to not make it too complex.
You’re welcome. It seems we humans like to make everything more complex than it is. I wonder if it because we feel the need to challenge ourselves and make things hard so that if we actually do them we can feel good.
In my family we take small things very seriously. We’ve started a number of important goals with little more than $20. For example our emergency fund. We put away $25 each paycheck until we saved up several months of our expenses. Now we are doing the same thing with a vacation fund.
We do the same thing. We have numerous savings accounts that are labelled for different purposes that we contribute to every paycheck. It really simplifies things.
I am glad you are doing so well Jeremy. If you ask me all of those changes are positive. I am sure with eating less fast food you are feeling better too.
We also do self managed investing and it really isn’t that tricky. Index funds are pretty simple and provide good returns.
You are right- it takes more than one change to make a difference.
I’ve made a lot of mistakes wasting away money before I realize the things I could’ve done with that money. Right now, we’re attacking our credit cards first and worry about everything else later
I have been there too. Many of us. The trick is to start becoming aware of your spending. Then you can stop yourself if you are going to buy something you don’t need. I am glad you are hitting this point. I am sure you will notice a positive difference.
I totally agree with you. 🙂 All the small changes we make can add up and really change our lives and finances. That’s how I started, with very, very small steps and now I’m able to do more. Great post, Miss T.
I started that way too. I made little changes and in time I saw the benefits. It much more manageable to make small adjustments then to try to change too much at once. Glad you are doing better too.