If you go through our blog posts, you’ll find that we rarely talk about specific investments here. One reason for that is that, in general, being a successful investor has very little to do any particular investment. In fact, it is almost wholly about understanding how to invest properly, and then following through with consistency.
Anybody who has established strong habits–good or bad–knows the tremendous power they carry with them. Many people are zealous about their daily walk or run. Other people like to check their email first thing in the morning, or read a book every evening when they get home. If you have a strong habit, think about how much effort you have to exert to slip into that habit: chances are, the answer is “almost none.” That’s because the decision making is already done. You don’t have to make up your mind anymore. You just execute automatically.
But the sad fact is that many of us just don’t get around to forming the same kinds of financial habits. We rely on our best intentions and a hundred day-to-day decisions to come together for our financial good.
In a recent newsletter, Carl Richards of BehaviorGap.com (who we’ve featured before) talks about the risk of relying on willpower and discipline alone to help us reach our financial goals. He says, “Willpower, like a muscle, can get tired if you overuse it”, and goes on to say, “So on the ‘easy’ decisions, like saving regularly for your kid’s education or your retirement, embrace the option to automate. Save your willpower for the really tough decisions, because they will come.”
This is sage advice. Sure, there are plenty of times when you need to make a change to your financial plans to accommodate an unusual situation or a change in priorities. But for long-term investing and saving, the best course of action is to “set it and forget it”. That way, you only have to use your willpower once, but you reap the benefits for many years to come. It’s a bit like planting perennial flowers–you only incur the effort of planting one time, but enjoy the plants every year.
At GoalMine.com and some other financial sites, you can set up a financial plan that will automate the process of transferring money from your bank account into your other financial products. We encourage you to set up a financial plan and then automate as much of it as makes sense for you. That quick burst of willpower can be worth its weight in gold (or any other financial instrument).
Images: Runner via Giulio Menna, sage plant via linzeeanne
