A sports scientist recently told me that an estimated 5% of people actually follow through on their fitness goals that are sparked by New Year’s Resolutions. This will resonate with anyone who consistently trains in a sports club or gym. Every year the gym fills up in the beginning of January and by Valentine’s Day, things are back to normal… until Spring Day. The gyms fill up again as people get motivated by Spring but sadly this inspiration seems to wear off by the end of October.
The consistency of this pattern would be amusing were it not for the fact that obesity is increasing around the world and lifestyle-related illnesses kill larger numbers of people every year. The world of financial planning has similar patterns that repeat themselves with monotonous regularity. The consequence of this repeated behaviour is equally damaging to people’s living standards. A bit of discipline, a fraction of delayed gratification and some planning is all that is required to avoid becoming another statistic.
Consistency is key
Fitness and financial well-being can only be achieved if you maintain your discipline consistently – that means sticking to your plan every day of every week through the year. A quick burst of effort for three weeks at the start of every year and again in late December is not going to help you reach financial freedom. Splurging on your credit card or buying an unaffordable car will send you backwards because you will have to dig yourself out of a debt hole before you can start building your wealth.
To me, the key to financial freedom is to have the right mental approach to money. You could think of yourself as someone training for a half-marathon. It is not possible to run 21.1km after training for three weeks. You need to set yourself a series of small, reasonable goals that you work towards every day and your daily goals need to form part of a weekly plan that ultimately leads to your primary goal – financial freedom. This does not mean that you cannot enjoy life and that you cannot spend money on luxuries until you are old and rich. You simply need to plan how you save, spend and invest. A great savings plan always includes some money for luxuries that keep you motivated.
If you are wondering how to start yourself off on the correct path to financial freedom, you could consider some of the following pointers.
- Write down a budget
People who achieve financial freedom share one common characteristic, they control their money. This starts with a simple budget that can be easily written down on one piece of paper. Make sure that your budget is realistic and that you include all your expenses, even the ones that don’t occur monthly (doctors, dentists, tax etc.)
- Get a training buddy/group
If you are not really disciplined with money, try to find yourself a savings buddy or a savings group. This is very similar to a running partner or running group. Stokvels are a great example of how people can use positive peer pressure to help them set savings goals and then to stick to them over time. There is nothing to stop you from creating your own group where you each agree to save a specific amount and then you meet monthly to determine if you are on track. If you are in a committed relationship, you could agree monthly savings goals with your partner and then help each other to stick to these goals when the urge to splurge strikes.
- Retirement funds/tax-free savings accounts
If you are earning a salary, don’t forget to make use of your allowances to contribute to retirement funds and tax-free savings accounts. You need to do this before the end of February as your allowances follow the tax year.
Achieving financial freedom is not complex, the steps to freedom are basic and easy for anyone to understand. The hard part is to maintain the discipline required to achieve your goals on a regular and sustained basis.