From time to time I find it helpful for me to do a post based on something I’ve been struggling with, because perhaps if I write about it it’ll help me out personally, but also because if I’m struggling with it, perhaps others are too! Recently I’ve really been wrestling with the perceived slow growth rate in my own personal finances when it comes to tracking my net worth. I think that the COVID pandemic has given me less things to do or focus on, so I’ve been extra focused on my personal finances. I’m super thankful to still be gainfully employed, as I know many of my friends and readers of the blog are not, so I even feel worse for stressing about my finances. I often have to remind myself that personal finance is a marathon, not a sprint! 

The safe way vs the risky way 

One of the reasons that I remind myself that financial success is a marathon is that the best strategy to achieving it is to actually achieve it slowly. Most investments that young professionals hold are going to grow in the range of 0.01%-2% for our savings accounts, maybe 2-6ish% for house appreciation, and historically the stock market has returned 8% on average. Those percent increases are measured on a full year basis, so starting with $1,000 in January might (on average) grow to $1,080 by December if you invested it in the stock market. Talk about slow growth!

However, the alternative to these types of investments only get riskier. There’s the old adage, “high risk, high reward” so if you want more reward, you’ll need to incur more risk. When you get into riskier investments, you might find yourself more with individual stocks, highly leveraged (i.e. a lot of debt) investments, options or even new fads like cryptocurrencies. The riskier you get, the more into ‘gambling’ territory you enter. Gambling is very different from investing and it’s important not to confuse the two. I personally don’t gamble but I do occasionally purchase individual stocks which are riskier. For every big winner I hit, I have another one where I lost plenty of money. It’s certainly a rush but I don’t think it’s gonna make me rich in the long run! 

While you might make a little money here and there, it’s not a sustainable investing strategy and sooner or later, just like in gambling, the house always wins back its money! 

I know the secret to success

One of the mantras I try to follow in regards to my personal finances is making small, good choices and repeating that over a long period of time. I know that I need to contribute 15% to my retirement, pay my mortgage each month, save for bigger purchases like a car (yes, I always pay cash) or house repairs/upgrades, and also invest anything leftover. I know that these small habits now will bring me success in the long run and hopefully I’ll be able to retire around the time I’m 60, have the house paid off, and have put aside enough for BabyMoneyFinance to attend college. 

However, 60 is a long ways away (this is YoungMoneyFinance after all, not OldMoneyFinance), and the 15% and the amount of saving/investing I’m doing doesn’t feel all that much like I’m moving the needle. I track my net worth on a monthly basis and it’s kind of as exciting as watching paint dry in terms of how quickly it’s going up. Remember, 10% growth, which is considered good growth for an investment is on a yearly basis so that $1,000 that grows to $1,080 only is growing $6/month. 

What I really need to do

One of the big challenges in life is the comparison trap, and as Teddy Roosevelt said, “comparison is the thief of joy”. Keeping up with the Jones’ is sure a whole lot easier when everyone’s lives are on display on social media. People portray their best lives (or curated lives) as their normal lives and it’s hard not to be jealous of their: bigger houses, bigger families, better jobs, nicer cars, better toys etc. I’m not even on social media hardly ever but it still has an effect on me.

The two big things I’m trying to do to get out of this rut is a) be more thankful for what I have and b) remind myself this is a marathon and celebrate the small wins. In terms of being thankful; once I start listing it out (great family great job, great house etc), I feel better about our own progress and I start worrying less about what others are doing. Secondly, I have to remind myself that 5-10% growth year over year is solid for my investments, and as long as I keep saving 15% for retirement and then 15% for other investments, I’ll be ok in the long-run. I won’t be retiring next year or the year after, but I keep my head up knowing that one day I will be able to! 

Financial success is a marathon not a sprint! Stick to the basics, don’t get too fancy and avoid the comparison trap and things will be ok for both you and me!