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
`