Later in life can be a time for reflection on our fondest memories, biggest achievements, and the things, in hindsight, we wished we had done differently.
As the saying goes, ‘hindsight is a wonderful thing, but foresight is better.’ Below we bring you a collection of common pieces of money wisdom that seem to have stood the test of time.
Whether they resonate with you or provide inspiration for conversations with loved ones, we hope you find them useful.
1. Don’t miss out on what’s most important in life
In the noble endeavour to save as much as possible, we often forget to prioritise spending money on the things that really matter most to us. Missing out on that trip to visit long-distance friends or family or not investing in studying towards a more meaningful career might help you save a few more dollars, but will it become a lifelong regret?
Planning your finances around your values is one way to keep your spending focused on what really matters to you. Rather than getting sidetracked by meaningless spending or making unnecessary sacrifices, being clear on your values can often help to make your money decisions easier and your saving and spending much more satisfying.
2. Make your money work hard for you
If money was a travel destination, compounding would be one of money’s ‘hidden gems’. The idea that your money can be put to work for you, and the interest or investment returns you earn can rapidly snowball over time is a powerful idea. Often, people only discover the power of compounding once they have seen the effects first-hand. And when they do, they wish someone had told them to start saving and investing earlier.
While you may be very familiar with the idea of compounding, this hidden gem is a good one to share with younger family members who may not know that, when it comes to saving and investing, the earlier you start, the more you can earn. Small steps now can make a big difference to their future finances.
3. Make peace with your money decisions
Most of us would rather live without uncertainty. But life doesn’t work that way, and making any life or money decision inevitably requires a leap of faith that things will work out in the end. While this is usually the case, we can often waste precious time and energy regretting past decisions. Should we have fixed our mortgage? Did we sell our house at the wrong time? Should we have chosen a different insurance policy?
One of the best ways to overcome these regrets is to remind yourself that most of us make the best decisions we can at the time, and with the information we have. And often, not making any decision can be the biggest risk of all. With this in mind, remember to commend yourself for taking action—this can be a more effective way of making peace with yourself and moving on.
4. Commit to continually educating yourself
Most of us believe that we are ‘good’ or ‘bad’ with money. Whatever life experiences may have led to this conclusion, there is always a way to self-improve. As the saying goes, knowledge is power, which is certainly true when it comes to making money decisions. Empowering yourself with information is a good way to help you spot opportunities, make adjustments, and generally feel more in control of your finances.
3. Don’t be afraid to take calculated risks
All risks come with a potential downside, after all, that’s why they’re called risks. But often, when we evaluate risks, we focus on the risks of taking action and overlook the risks of doing nothing. For some of us, we may also find a behaviour gap can arise between what we should do (rationally) and what we actually do (irrationally)—cognitive biases can play a part in this.
As an example, our fear of market volatility and losing money may lead us to take an investment approach that may be too conservative. We may see this as a less risky strategy, however, the greater risk might be that our savings don’t grow sufficiently to support us in retirement.
That’s not to say that the risks you take shouldn’t be measured or properly understood. On the contrary, it’s important to understand the level of risk you may be taking with any financial decision. But it’s just as important to look at the risk from both sides of the coin, and weigh up the level of risk most appropriate for your circumstances.
If you would like to talk to us about anything in this article, please get in touch.