FIRE,  Life,  Work

1 Simple Step for Personal Finance Beginners

Reading Time: 2 Minutes

What’s up everyone!

How’s it going?

Had a very interesting discussion at lunch with some work colleagues today.

As you all know, we live in Sydney, Australia – an absolutely amazing place to be.

Unfortunately that awesomeness is offset by the supreme cost of living, quid pro quo as they say!

Wanna live here? An arm and a leg please.

And this was the topic with my colleagues.

One of them recently had a baby, and he was telling us about a trick he is employing for their future.

Well, it’s not necessarily a trick but more of a life hack.

Basically the guy loves Bubble/Boba teas, often guzzling 3 or 4 a DAY.

So once he had his baby, he’s started to implement a new rule.

He would drink one less tea and instead deposit $10 into a savings account daily.

The savings account would be completely different to his everyday account.

Out of sight, out of mind.

And once he reaches retirement age of 70 in 40 years time, he’s going to present this as a gift to his child.

Simple and effective plan!

Though you know how much he will have at the end of it?

$10 * 365 * 40 = $146,000

But wait!

He will be earning interest on any sum deposited in the savings account.

Even if we assume a 2% savings rate… that figure rises to over $223,000.

Who woulda thought! It just highlights the brilliance of compound interest.

I think it highlights the brilliance of Bubble Tea to be honest…

Compound interest has been described as the 8th wonder of the world.

But the results are truly phenomenal the longer your time horizon is.

It doesn’t even have to be applied to finances.

I’m always amazed at how knowledge can be compounded, from an absolute beginner to amateur, to semi-pro turned professional.

Or results at work, just by working an extra 1% harder/smarter than everyone else.

Or with relationships, how much stronger they are because you are always working on them.

Conversely, a toxic relationship will progressively get worse, laziness at work will eventually be found out, and you’ll eventually pay for ignorance.

Oh! And of course, it applies to personal finances as well, neglect and naivety will cost us BIG time in the long-run.

So come on guys! That first step of personal finance doesn’t have to be difficult.

It can be as easy as drinking one less sugary drink a day!

What’s stopping you?

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