Simple way to turn $5 into $905,000

To many Aussies are ignoring this one pathway to becoming rich – and it’s costing them hundreds of thousands of dollars.

ANALYSIS

Most people who start a new diet fail. And unfortunately it’s the same for money.

Having seen inside how thousands of people manage their money, I’ve found the real difference between those who succeed and those who fail is something so small that it can seem almost trivial.

People who are successful with their money leverage the power of momentum.

When momentum is working in your favour, each forward move becomes easier because of the step before. The power of compounding kicks in, and things start accelerating. You get better results faster with less effort.

Consider this example. If you were to invest $20 per day this year, based on just the long-term sharemarket return of 9.8 per cent that money would grow to be worth $19,373, $52,414, and then $136,447 over the next 10, 20, and 30 years.

This means that some small changes today will have a significant upside over time.

But it also means the cost of building momentum and taking action isn’t just having a smaller investment balance today – it’s the six figures-plus in wealth you won’t build over the years to come.

If you let your money momentum fade away, before you know it another month or year has passed, and you’ve locked in an opportunity cost you can never get back.

How to keep your money momentum building:

Money can be complicated and confusing – but it doesn’t have to be. The actual principles of money success are simple – but simple doesn’t necessarily mean easy. Knowing where and how to get started gives you a serious advantage.

Always invest

Investing just $5 per day for a 25-year-old could grow to a staggering $905,133 by age 65, based on the long term Australian sharemarket return of 9.8 per cent. That tells me you don’t need to do a lot, but you do need to be consistent.

Particularly in the current environment with high interest rates, inflation, and the cost of living crisis, many Aussies are feeling the pinch and struggling to make ends meet. For many, investing is a long way from their focus.

It can be hard to focus on investing while money is tight. Picture: Unsplash/Towifiqu Barbhuiya

But at the same time, the sharemarket in Australia and around the world is down, meaning that quality investments are selling today at a serious discount. The next 12-24 months are likely to be up and down in markets, but this period of disruption will pass. When it does, the people that were able to keep investing will be rewarded, and those that weren’t will have regrets.

Find a way to keep investing – doing anything is so much better than doing nothing – and apart from the financial upside, you’ll get a heap of peace of mind and confidence from the fact you’re moving forward.

Focus on your ‘roadblocks’

If you think about getting from the position you’re in right now to where you really want to be with your money, it’s likely there is a list of things that are slowing you down or holding you back.

It could be things like not understanding investing, not being good at saving money, not knowing how to be smart with tax, or any number of other financial challenges. These ‘roadblocks’ are the things standing between you and the results you want, so clearing them will help you keep your momentum building.

Don’t let roadblocks hold you back from investing. Picture: iStock

Take the time to think through and list your money roadblocks. This will become your action list. Start with the roadblock you think will have the biggest impact on your progress, then focus on clearing it. You’ll be rewarded with faster progress and an easier path to the results you want.

Get clear on your next step

True financial success is a huge goal that will often take decades to achieve. It can seem so big and far away that it’s overwhelming and almost impossible. But as the saying goes, the best way to eat an elephant is one bite at a time.

When you’re working towards your money success, there are a heap of things you can do, and a heap you will do over time – but you don’t need to do them all now.

What you need to do now is take the next step.

When you take the smartest next step for you, you’ll move you closer to your goals and keep your momentum building. This in turn will make your next step easier, and so the cycle continues.

When you narrow your financial focus to taking the next step, you cut through the ‘noise’ that surrounds money, and you make it happen faster and easier.

Educate yourself

It’s one thing to know what you should do with your money and investing, but it’s another to know why it’s the best thing for you. When you don’t understand the why behind the what, there’s often a large amount of fear that surrounds taking action. This fear can be paralysing, and hold back your momentum.

Educate yourself to work out what is the best move for you. Picture: Unsplash/Aidan Hancock

Once you’re clear on your next step, take the time to educate yourself so you understand why it really is the best move for you. When you get clear on the why, it will give you more confidence to take action sooner – meaning you’ll get the results you want faster.

Put the time aside

Money is something that’s really important, but often not urgent. This means it’s easy for it to get pushed down our to-do list for a tomorrow that never seems to come around.

If you want to get results, you need to put the time aside to make it happen. When you follow the process outlined here, your money shouldn’t need a lot of your time, but a little goes a long way.

Put a standing appointment in your calendar with yourself to check in on your money progress and take action to keep things moving forward. This will ensure your momentum consistently builds, moving you closer to the results you want and ultimately financial success and security.

The wrap

Whether your financial focus is fresh or you’ve been at it for a while, keeping your momentum going will pay big dividends over time and go a long way to giving you confidence and reducing financial stress. There’s a lot to be done, but it doesn’t have to be hard if you take the right approach.

Ben Nash is a finance expert commentator, financial adviser and founder of Pivot Wealth, the creator of the Smart Money Accelerator, author of Replace your salary by Investing and host of the Mo Money podcast. He runs regular free online money education event which you can book 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.