Why get-rich-quick schemes are doomed to disappoint

“What investment will give me a 10 per cent return in 2 years?” “I invested 2 months ago, but I’ve already lost money.” “I struggle to save. How do I save a few thousand in a couple of months?”

When I get comments like this, I immediately see one big problem: the expectation of, or attachment to, getting quick and immediate results.

We all have some level of “addiction” to short-term gratification, but this tends to be particularly heightened with money. This is partly due to a lack of understanding around how wealth works, and partly due to the intense fears people have around money.

It is possible to make money quickly, but wealth is a long-term game.Credit: Simon Letch.

The more intense your fear of losing money, the harder it’ll be to watch your investments move up and down in response to market movements. The more desperately you want to see money coming in the right away, the harder it will be to make short-term sacrifices for longer-term gains.

This plays out in people’s financial lives more than most realise. Here’s what it could look like:

You’re scared to make career moves

You’ve worked hard to get to where you are. You’re not quite happy, but you’re scared of moving “backwards”, even if a few years of “backwards” movement could set you up for more fulfilment and money longer-term.

You keep chasing savings hacks

You’re always looking for a new tip to save $10 off your petrol, but it doesn’t seem to be making a meaningful difference to your bank account. Meanwhile, you avoid reviewing your expenses to see where your money is going, or planning a savings strategy. This will create consistent, sustainable savings, but it demands patience.

You’re highly reactive to short-term market movements

Any short-term dip in the sharemarket terrifies you. You’ve sold shares during a market downturn out of panic, or you avoid investing altogether. Since markets typically go up after they go down, if you’d held on, there is a decent chance you would have been okay, but that requires a longer term perspective.

Here’s the thing: you can’t build long-term wealth on a short-term mindset.

One reason people struggle to understand this is because most people confuse money and wealth. One useful way to understand the difference is to think of money as being measured in cash or income, and wealth as being measured in the value of your assets.

It is possible to make money quickly, but wealth is a long-term game. The more you can think and act for long-term benefit, the better you will be at the game of building wealth.

So, how do you shift into a more long-term financial mindset? Here are some things that have helped people I’ve worked with:

You can’t build long-term wealth on a short-term mindset.Credit: Getty

Create more safety

It’s difficult to think long-term when you’re in survival mode. One layer of this is creating more financial safety. If you’re unable to afford the bills, you have income insecurity or mounting debts, all this will heighten your sense of financial insecurity. How can you create more financial safety for yourself?

This could ironically require some short-term measures that will give you the breathing space to get out of survival mode. Maybe you need to move back in with your parents, or get a flat-mate, or pick-up a weekend job.

Another layer of creating safety is psychological and emotional. Some people are not financially in survival mode, but still operate as though they are. If you’ve got a stable source of income, decent savings, you’re not struggling financially, but you’re still operating in a short-term mindset, you may be lacking psychological and emotional safety in other areas of your life, or you may have learned survival mode as the default, and it’s time to start casting it aside.

Start valuing long-term payoffs over quick wins

Start asking yourself: “How will this one decision help me in 1 or 2 years?” This question will start making you more present to which decisions have a short-lived benefit.

You might notice: skipping one coffee will save me $4 today but 1 year from now, I’ll still only have saved $4 from skipping this coffee. In contrast, investing $4 today could turn into more than $4 in 1 or 2 years.

When you start to notice how short-lived some of your decisions are in their impact, you’ll naturally start wanting to make decisions that have a longer-term pay-off. So, if you want to build real financial security long-term, start getting off the hamster wheel of short-term tactics and start investing in longer-term strategies.

At first, it will feel slow, uncomfortable and maybe even scary. But, over time, you might start to notice that the security and stability that comes with building something that has real staying power, is far more valuable than the quick boosts of dopamine, validation and adrenaline that come with short-lived quick wins.

Paridhi Jain is the founder of SkilledSmart, which helps adults learn to manage, save and invest their money through financial education courses and classes.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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