The secret to financial success in 2013? Baby steps
Preet Banerjee
Special to The Globe and Mail
Published Friday, Jan. 04 2013, 6:00 AM EST
Your landlords send you a letter informing you that rent is
going up $50 per month. Do you move? Probably not. Instead, you suck it up and
curse them under your breath.
Over time, we adjust to gradual price increases but only because
they come in baby steps. When I was a kid, I remember $2.50 Tuesdays at the
movies. Today, you can pay almost $20 for a single adult admission. Had the
jump been instantaneous from $2.50 to $20, I would have stopped going to the
movies. But because it took place over time, I saw Skyfall multiple times.
Baby steps. They don’t sound like much but they can be key to
your financial success .
When I was a financial adviser, I would ask clients if they
wanted to increase their automatic monthly contributions by $10, or 10 per
cent, or whatever, every New Year. After getting used to the initial drain on
their cash flow when setting up the original contribution, a small subsequent
increase was no big deal.
But consider this: Two investors contribute $1,200 per year to a
portfolio that grows at 5 per cent per year for 20 years, except one increases
his contributions by 5 per cent every January 1st. By doing so, he ends up with
more than 50 per cent more money ($63,679.14 vs $41,663.10).
That first 5 per cent increase is only an extra $5 per month.
The 5 per cent increase in year 20 is only an extra $12.03 per month.
Turns out, those baby steps really add up.
This doesn’t apply exclusively to investing. Many people are too
frustrated with the markets to invest, but they could apply the same principle
to paying off their mortgage. Or saving up for a vacation. And with just over
360 days until Christmas 2013, inflation alone would dictate an increase in the
cost of presents next year versus this year.
As the New Year begins, think of the various ways you could
increase your financial position with various baby steps. You won’t feel it
much, if at all, today, but the difference over the long haul could make you
curse yourself under your breath for not doing it.
I do this for all y clients who have me arrange their mortgages. I have a follow up system designed to help you with these baby steps so you can be in a stronger financial position!
Call me today! Amy Wilson
780-919-0475
Verico Brokers For Life
No comments:
Post a Comment