It is coming towards that time of year when people are reviewing their year, and considering their New Year’s Resolutions for 2019.
A lot of these objectives are linked, directly or indirectly, to our financial lives. What techniques have I seen work for my clients and myself?
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The first technique I have seen work is gradualism. If you are too strict, too soon, you are likely to fail at something.
If your objective is simply to earn 10% more or spend 10% less, the chances of success are high because it is easy to find small ways to earn more or cut back expenses. Once you hit the 10%, you are likely to be greedy for more.
Gradualism is especially effective if you do something straight away. If want to do something, why wait until January 1? Why not try to improve by 10% now? Often delaying or thinking about something is just an excuse for inaction.
2. Use time on planes productively
In modern life, WIFI and 4G has become more and more important. Some have even joked that WIFI should now be part of Maslow’s Hierarchy of Needs!
However, all these digital distractions aren’t good if you use them 365 days a year. I have written a book on a plane and I am writing this article on a 7 hour plane journey from Tokyo to Bangkok.
You have little or no distractions on a plane and you can focus on targets, business goals and personal goals.
3. Reading about goals and targets
Some of the best books I have read or listened to, are focused on targets. Brain Tracy has an excellent book on target formation. He recommends people do two things:
- Write down 10 goals on paper every day. Do it every day and you won’t even need to think about it.
- Write down statements such as `i have stopped drinking alcohol by December 2019`, or `i am earning 150k by November 2019`. The grammar doesn’t make sense in English, but by having a specific target, and telling yourself that you have already achieved it, your mind thinks achieving the goal will automatically happen. Provided you don’t take it to the extreme by being complacent about the hard work that needs to go into achieving the ambition, this is an effective technique
Another effective technique is to take off 1 week per quarter. So take 28 days off a year if you are a business person who works for yourself. That means little or no internet for business use for 1 week per quarter. Focus on resting, planning for the quarter ahead and seeing your business from a birds eye point of view. Switching off on weekends is another good idea.
4. Learning about breaking bad habits
Some crude rules have been made, such as `the 20 day rule`, which implies you can stop a bad habit after just twenty days. Twenty days isn’t a long time to break a habit of a lifetime, but what is true is that we get into good and bad habits automatically.
Do you need to be reminded to tie your shoelaces or brush your teeth? Probably not as it is a habit which we get into at an early age.
Likewise, with investing, it is easy to get into positive habits by keeping to something for a few months initially.
A great example of this is direct debits. If you are paid on the 10th of each month, putting a standing order to have money taken out on the 11th will ensure you have self-discipline with spending and will be invested without even thinking about it.
5. Surrounding yourself with people you want to be like
Most people want to achieve financial independence or a similar goal, but it is hard to imagine it if nobody you know has done the same thing.
Find likeminded groups, or use the internet to hear about others who have achieved it. Once you start to see `normal` people achieve the goals you want to achieve, you are more likely to achieve them yourself.
A great example of this is a recruiter friend I have. From a working-class background, he struggled to imagine earning 100k-200k after tax.
After two months in the office, he saw people from similar social-economic backgrounds do well. They weren’t smarter than him, they just had more experience. Seeing them achieve such results made him realize he could do it too, with hard-work and dedication.
At the same time, distance yourself from toxic people.
6. Focus on the 80/20 rule
Focus on the 20% of activities that generate 80% of the results,. And the 4% of activities that achieve 64% of the results. Spend more time on these activities, and less time on pointless activities, to achieve goals.
7. Learn to say no
Warren Buffett once said that the difference between those who succeed and those that don’t is often focus and the ability to say no. Say no more often to invitations to social events you don’t even want to attend. Your finances will thank you for it. It is amazing how much people spend time trying to impress random people.
8. Learn to ask
Society often teaches people to not be pushy, and not negotiate. However, negotiating small discounts and pay rises can make a huge difference to your finances long-term.
Simply negotiating one $5,000 after tax pay rise, could result in over $1m of extra wealth in 30 years, if you invest the surplus properly.