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I once met with a surgeon who earned over $1m per year but was broke. At our first meeting he entered the office cuffing away tears as he said that he’d just got off the phone to the tax office and they were demanding payment of $1m in outstanding taxes. He was very stressed.

We spent the next couple of hours breaking down his finances and came up with the scratchings of a strategy that could help break out of the mess he was in. We did need to spend some more time to work out the detail and I started to talk about a second appointment.

He explained to me that he couldn’t meet for at least another two months as he and his family were off on a ski holiday to an exclusive super expensive location. I asked why he wasn’t just going to a regular spot that has great snow but much more reasonable prices and he said he couldn’t possibly do that because ‘life, is too short to ski in the same place twice’.

It was at this point that the pertinence of the old saying really hit home, “it’s not what you earn that counts but what you do with it”

Habit Stacking

In his book Atomic Habits, James Clear explains the concept of habit-stacking. Habit stacking is the idea of performing a habit easily because it’s built on, or stacked on, the back of another similar habit.

Making enormous change in your life can be difficult to picture but if you utilise a series of smaller habits and build one on top of the other then the change that once seemed so daunting can all of a sudden be overcome.

Everyone uses habit stacking but don’t even realise it so the concept unfortunately does a lot of damage to people’s finances. To illustrate, your friend might get a payrise and as someone who has been frugal they’re determined not to waste it. In fact, they can’t even visualise wasting it because it’s something they’ve never done. But given it’s a payrise they decide that they can spoil themselves so they buy a new pair of shoes. These then need a new suit which then needs a new watch which then needs a new diet of eating out every day.

Be aware of this one behaviour flaw so that it doesn’t destroy your finances. Use the following steps to flip this around, use it to your advantage and accelerate your growth.

Get Started

It’s very easy to be daunted by big goals. Working in an inner city suburb of Brisbane, I once met George, a Greek man with a very credible share portfolio. From a community of property lovers and never earning a particularly strong income, I was intrigued with just how George had come to amass this small fortune.

He told me that as a school leaver at age 15, he laughed at advice he received to put 10% of his pay packet away into a diversified share portfolio. What was so laughable he told me was that he was earning about $10 per week so 10% was a grand total of $1!

George stuck to the advice however and continued to invest more and more as his portfolio grew. The real secret that George attributes to his success is that he got started, even though the amount he started with was literally laughable to him.

Step Up Your Small Savings

Any amount of saving will be crazy impossible if you set a high target and then rush at it all in one hit. If you try to lose weight in a hurry with behaviours that are unsustainable you’ll soon revert to the high calorie, short term foods that caused the problem in the first place. Using a strategy of small incremental changes over a longer period of time helps to lessen the short term pain of change but contributes significantly to your long term goal.

If you’re starting with a small saving amount like George did above, use what we call a ‘step up’ strategy to build on.

This is where you take your very small amount of saving, that amount you started with and then build on it little by little at a predetermined date such as the beginning of a quarter, the 1st day of the year or your birthday.

Using percentages works best because this keeps your savings rate relative to your income as it rises in the future. If you’re aiming to reach 10% but can’t afford it yet, then start with 1% and increase (step up) the rate by another 1% every 3, 6 or 12 months until you reach 10%.

This doesn’t sound like much but your finances will reward you over and over and over as long as you expect more from the long term and less from the short term.

What are we waiting for?

Your money goals, plans and actions that you put in place today are going to make an enormous difference in the long term. You must get started now, start small, build slowly and methodically, ignore the neighbours and the social media bragging, and be relentless in sticking to your strategy.

The wealthiest people I’ve met weren’t born to money, they didn’t inherit money, they didn’t win lotto, they weren’t early investors in cryptocurrenty and they didn’t win big on some investment.

They were alert to their own behaviours, they got started and they stepped up relentlessly.

It’s simple and definitely not easy but it can be done, just make a start.

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