Too often, what goes without saying goes without doing, or getting done. It’s never wise to overlook the obvious—in any aspect of life.
When it comes to investing, one thing that almost always is simply assumed is that one has the money to invest. If you don’t have the money to invest, you don’t invest, right? Well, where does this possible pool of money come from?
Usually, the common sense (not so common) answer is surplus. You make X amount of money through your work. You need Y amount to live on (according to your lifestyle and responsibilities). So, the difference between these amounts, again assuming that this balance is positive, is potentially what you can draw on to invest.
It’s not complicated to see what the problem is with this model.
Research consistently shows that the majority of people, even some very high earning (and theoretically financially astute) people, overestimate their income and underestimate their costs of living. Their surplus pool just shrank.
An inheritance? A windfall? A bonus? Nearly 90% of the time, a sudden injection of funds gets quickly accounted for, whether the extra money was anticipated or not. Is it really a surprise then that governments struggle to balance budgets, when individuals and families can’t? Just consider how easily a tax refund gets spent.
This is more than just a financial management problem. It’s human nature. We are bombarded by advertising messages encouraging us to spend, spend, spend. Today, there’s almost an obligation to reward ourselves, indulge ourselves—to live for Today.
“One month after the IF Group helped me establish a solid and tailored savings program that I could actually fulfill, I noticed some distinct changes in my life overall.”
The result of this kind of thinking (or lack of thought) is that “investing” becomes a concept that’s only accessible for a select few, who by the definition of the model in play, have sufficient funds to invest, because of surplus. Either you make more money than you need to live on, or you are very prudent with some additional funds you come into, for whatever reason. Is there a different model you can follow? Yes, there is.
The Saving Habit is something everyone can learn and use to their advantage. If this sounds like “tightening an already tight belt” or doing without, you’re being melodramatic. China, a complex nation of many different kinds of people, has an immensely high ratio of personal saving relative to Australia. The most effective saving actually happens at the lower economical levels. Is there a secret?
The “secret” is really no mystery. It’s an artificial tax you impose upon yourself for each dollar that comes your way. This is exactly the same basic principle that superannuation works on, and without enforced super, the vast majority of Australians might not have any retirement funds built up at all.
If you have a mechanism or process in place that functionally allows you to easily (and automatically) divert ten percent of every dollar at your disposal into a potential investment fund, you would be surprised at how quickly you can become part of the Investment Class. You will also be surprised at how quickly you adjust your spending and overall lifestyle around this practice. The key is eliminating the constant need for discipline and “wise decisions.” As we’ve seen, they don’t happen as a rule. It’s too inbuilt in our society to spend the money we make. A fact of Australian life is that not enough people invest because not enough people are good at saving.
At The IF Group, one of many important things we do to help our clients be better in control of their financial lifestyles is to establish Savings Programs that really work. We can then show you how you can deploy even small amounts into a genuinely effective investment plan. You don’t need relatively large lump sum amounts, such as with a property deposit. There are many other options available—and they offer much more flexibility than you may think.
Put very simply, having a savings program and a balanced approach to investing isn’t something for only wealthy people. In proportion to your income, you can be doing it right now. Let us assist you. The Savings Habit, like good fitness habits, isn’t something complicated. But it’s also not something you can necessarily do on your own.
As with other key aspects of life, such as health and relationships, once you feel more confident and assured in one, other things start falling into place too. Contact us and find out how you can make saving a habit, and make investments happen. It’s easier than you may believe.