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Saturday, January 28, 2023

Simple change to make $3 million with just $234

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By this time of year, most people have tapped out.

They’re holding on for the well earned Christmas break and they take their foot off the pedal …

But here’s the thing; over the last decade or so helping people with their money, I’ve noticed a costly trend. A lot of people have grand plans for the things they’re going to do with their money in the new year. They tell themselves over and over that next year will be the year they nail it.

But then the new year rolls around and it all feels too hard.

Anecdotally, I’ve seen this a heap of times over the years. The good news is that most people get things on track eventually. But when they do, every single person wishes they’d done this sooner.

And it’s an expensive way to go about your money, because once the time has passed, the opportunity cost has been locked in.

If you’d invested more a year ago, those investments would be working for you today, and your money would be compounding every year forever, leading to significant financial upside.

In Australia, the average pre-tax income is $92,029 or $1342 per week after tax, and the average savings rate is 8.7 per cent, reflecting average weekly savings of $117.

If you could manage to double your savings rate and save an extra $117 per week and then invest that money into the share market, based on the 30-year return on shares of 9.8 per cent, over the next 10 years that money would grow to be worth $102,675.

Keep this going, and over 20, 30 and 40 years these extra savings would grow to be worth $375,162, $1,098,307, and $3,017,442.

It’s easy to get off track and let your new year’s money resolutions slip, but finding a way to make them work is valuable.

How to nail your new year’s money resolutions

It’s not easy, but there are some things you can do to drastically increase your chances of success.

Pre commit

An effective way to make sure your goals get off to a solid start is to ‘pre commit’ to some actions that will move you forward. It could be locking in a money date night with your partner, setting a time (in stone) to go through your budget or money planning, starting a course, or booking a meeting with a professional financial adviser or coach.

With anything new, important, and challenging, your first step is the hardest – but once taken you start building momentum that can make your next steps easier. If you have something locked into your calendar and have committed to it, your starting point is sorted.

Build new habits

A big part of money success is driven by your habits and behaviours around money. If you want to get the most out of your money, you need to level up your money habits. This can be around how you spend and save, how you check in on your money, when and how you plan with your money, and how you invest.

Changing habits and behaviours takes some time and some work, and in the early days it can seem like a real struggle. But once you lock your new habits down, they become second nature, and before you know it your new approach becomes almost effortless and part of who you are.

Be accountable

Money is something that’s important but mostly not urgent, which means it’s easy to put off for a tomorrow that never seems to come around. Being accountable to your goals and to your money success help you maintain the focus needed to get the results you want.

You can be accountable to a partner, a mate or family member, or a professional adviser or coach – the key is you’ve got someone you have to check in with regularly and report on your progress. Regularly checking in on your money progress has the added advantage of highlighting your wins that you should celebrate, and identifying any issues or areas where you aren’t fully on track so you can correct your course.

The wrap

Money success is something valuable and worth working for, but it’s not easy. Doing better with money is a common goal, but the statistics show us that the majority of people that set out to do better with their money fail. If you don’t want this to be you, you have to take a smarter approach.

To give yourself the best chance of success with your money goals, pre commit to your initial steps, focus on building better habits, and be accountable. When you get this right, you make it easier to get the results you’ve planned for, and before you know it you can focus on taking things to the next level.

Ben Nash is a finance expert, commentator, podcaster, financial adviser and founder of Pivot Wealth. He’s also the host of the How to be Successful with Money podcast, and author of the Amazon best-selling book Get Unstuck

Ben runs regular free online money education events to help you make better money choices and get ahead faster. You can check out all the details and book your place here

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.

Originally published as Way to make $3 million with $234 investment in ASX

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