$250k trap you’re probably falling for

If you’re 25 or over, you’re almost certainly making this simple money mistake – and it’s costing you more than $250,000.

Money is hard.

The basics of money success are simple: spend less than you earn, and invest the difference. But simple doesn’t mean easy.

You don’t want to make a mistake that you later regret, so you put off taking action for a tomorrow that never seems to come around. Before you know it, a day turns into a week, then a month, then a year.

And this is where things can get expensive …

Consider this example. For a 25-year-old today, saving just $100 weekly for the next year means you’d save a total of $5,200.

If you invested this money into the sharemarket assuming the long term sharemarket return of 9.8 per cent, you’d also benefit from some sharemarket growth so your money would be worth around $5,440 at the end of this 12 months.

Based on this, you’d be forgiven for thinking that the cost of not saving $100 a week for the next year is $5,440. But it’s actually so much more.

Because it’s not just the $5,440 you miss out on, it’s how much this money would then grow to be worth in the years ahead.

Most Australians fall into the trap of prioritising today over tomorrow, and it can cost them big time. Picture: Supplied

If you started with just $100 at 25, you could end up with $250,000 by age 65. Picture: Supplied

Assuming you didn’t save a single dollar more, leaving that money to bubble away until age 65 would see it grow to be worth $244,725.

That’s effectively almost a quarter million dollars you could make in just 12 months from just $100 per week.

This shows an opportunity, but on the flip side is the cost – not investing $100 a week for the next year would cost you almost $250,000.

It’s common when taking action with money or making big decisions that you don’t want to make a mistake.

If you then combine this with the challenge of trying to live well today, it gets even harder to

make it happen.

As a result it’s common to get stuck in the inaction trap, doing nothing and missing out on this opportunity to get ahead.

The inaction trap is an easy one to fall into, and a hard one to break out of. My top tips to avoid the inaction trap are below.

Think big picture

Take the time to think about what’s really important to you, and the why behind it. Living well today is going to be high on your priority list, but I’m guessing that making at least some moves to set up your future self is going to rank fairly high on your list.

If you constantly make your decisions in the moment as opposed to thinking of the big picture, you’ll end up prioritising today over tomorrow.

But when you step back, it’s easier to recognise how important it is to do at least something to make progress for the future.

This framing will guide your thinking around what comes next.

Understand your options

Here you should take the time to assess the financial impact of what you’re currently doing with your money, and the impact of making changes.

To get a baseline, you should look at how your money will grow if you keep doing exactly what you’re doing today.

Where your savings, investments, debt, and wealth will be in a month, a year, and years

from now. From there, you can look at the impact of making changes.

There’s money to be made investing, with just $100 a week being enough to make you a sizeable nest egg in the future. Picture: Supplied

You should consider how things would change if you could find a way to save a little more, invest more, invest vs. build savings vs. pay down debt. This will give you a sense of the financial opportunity for you, and you’ll likely get a boost in your motivation to do (at least a little bit) more.

Choose your path

Understanding your options is a great thing to do, but having great ideas won’t get you any more money, you need to choose a path and commit.

Know that every single path in front of you will have trade offs to balance and consider, and the upside will come with some risks and trade-offs.

There is no perfect path, but there is a best path forward for you.

Take action

This is where the rubber hits the road, you need to actually do the things that will drive the results.

This is where so many people get stalled, and it’s the biggest reason most people suffer from the opportunity cost I’ve outlined above – don’t fall into this trap.

Commit first to a timeline on when you’ll move things forward, and make it within the next week once you’ve chosen your path. Then make it happen.

Know that you’re not setting things into stone, and that once you get started you can refine and optimise your strategy and approach.

In fact, it’s easier to make changes once you get started, rather than when you’re standing still.

Ignore the stock market at your peril. Picture: Supplied

The wrap

Doing anything with your money can be a little scary – but it’s only by taking action that you can drive the results and future outcomes you really want. Don’t stay stuck on the starting line.

When you follow this approach, you push forward and will actually make a decision. Then you can take action, start building your momentum, and build on your approach from a place of strength.

Ben Nash is a personal finance and investing expert commentator, financial adviser and founder of Pivot Wealth. You can follow more of Ben’s free content on Instagram | Facebook | Podcast.

Ben is also the Author of ‘Replace your salary by Investing’ and Get Unstuck, and runs regular free online money education events, 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.