In wealth-building, focus on the playing field not the scoreboard
Building wealth is a process, not an event 鈥� a process that takes discipline and a long-term outlook. You must focus on yourself, not what others are doing. Work hard and maintain a consistent approach. This may not be easy, but it鈥檚 doable for most people if they choose to make a commitment and stick to it.
In the end, though, the 鈥渟tick to it鈥� part is what usually trips people up.
In an excellent聽聽on his blog Seeking Wisdom, Jana Vembunarayanan gives a fantastic summary of how to succeed at just about anything. Here are his observations and recommendations, to which I鈥檝e added some suggestions for applying them to your finances.
1.听Recognize that it takes a long time to create anything valuable.聽Investing works over long periods of time. The market has never lost money over聽any聽20-year stretch. The problem for many people is that they don鈥檛 understand their time frame. They confuse short- and long-term money and end up bailing at the worst possible moment. Finding a strategy that works, and sticking with it for decades despite the inevitable booms and busts of the markets, is not exciting. While you might feel you are missing out on the latest big thing, you will most likely have the last laugh.
2. Work hard every day even if you don鈥檛 see聽improvement in the short term.聽Building your skills enables you to earn a higher income, so you can聽. Small increases in savings each year are barely observable at first, but over time you can be working toward saving 20% of a $100,000 salary, which will provide great rewards in the future. Many will give up because they become impatient with聽a seeming lack of progress. Accept the short-term stagnation knowing you will be rewarded with the miracle of compounded returns in the future.
3. Keep doing it consistently for a very long time without giving up.聽Persistence is the key to any successful endeavor. While it might satisfy a short-term urge to remodel your kitchen by聽聽account, resist this temptation and stick to the plan. Investing is simple but not easy. Track your wealth accumulation yearly, not daily. This encourages you to build your future, not mortgage it.
4. Enjoy the process, and don鈥檛 worry about the outcome.聽Put things on autopilot. Set your plan to save a certain percentage of your salary,聽with an increase of a percentage point or two each year until you maximize your contributions. Find a few diversified, low-cost,聽add an automatic yearly rebalance, and forget about it. Enjoy your life and ignore the daily end-of-the-world events that聽saturate the financial media in their quest for advertising dollars. Focus on the fact that you will be financially secure by sticking to your plan. In your free time, devote your energies to finding things you like to do. Find ways to increase your skill level and聽eventually make money from a 鈥渏ob鈥� that doesn鈥檛 seem like work. This way to supplement your income might lead you down some surprising paths while you have the security of your savings plan at your day job.
5. Don鈥檛 compare yourself to others; instead, compare yourself now to yourself two years ago.聽Keeping up with Joneses is, as serial insulter聽Donald Trump would say, a loser鈥檚 strategy. A phenomenon called 鈥渓ifestyle creep鈥� can sabotage the best-laid plans. It means that the more you make, the more you spend. Your only accomplishment is making the hamster wheel spin faster. Don鈥檛 worry about what others have. No matter how rich you are, there will always be someone who has more than you. And such people might just be renters anyway, buying their goodies with credit cards with聽. Look at yourself instead. Build a disciplined savings plan, and follow it with no deviations. Competing with your neighbors over who has the most 鈥渟tuff鈥� is not a good use of your time.
As Warren Buffett once said, 鈥淕ames are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard.鈥� Keep these five points in mind, and your probability of success will increase immensely. Good habits will eventually lead to superior results in whatever you do. The key is to figure out what works for you and stick to it. Your process will determine your future. Spend time developing it, and then enjoy your life.
