We often encourage our clients to find ‘extra’ money to go towards their investments. This doesn’t have to be huge – a dollar here, five dollars there – to put away.
One thing that we like doing at the start of a new year is to have a look at the expenses from the previous year to see what we are spending. Sometimes, the expenses we think we have aren’t a true reflection of what we actually spend. For this reason, it’s great to go back and look through the last 12 months.
At the start of January, Michael found a recurring expense of $12 coming out of his account. He hadn’t noticed it coming out over the last few months, and investigated what it was. It was labelled as an Apple expense, so he tracked it down via the app and saw the description ‘Dot-to-Dot’. It took him a few minutes to connect the dots, but eventually he realised it was his 4-year-old son downloading a weekly dot-to-dot game on an iPad at home. As it’s his son’s favourite game, Michael didn’t want to cancel it altogether – but he did look into the app, and noticed that he could get an annual subscription for $40 (and not pay $12 a week!).
There are many expenses similar to this – small amounts coming out each week or each month, that can be easily missed.
In this scenario, getting the annual subscription saved Michael a cool $584 for the year.
But this is just the first step. After ‘finding’ the extra money, it’s important to invest that amount. If you don’t, you’re likely to just spend it elsewhere, particularly if it’s not a huge amount of money.
Of course, it’s not a huge amount now, but that $12 a week added to your super would add up and compound significantly between now and your retirement.
Why do we tell our clients to ‘automate’ their contributions? In this day and age it’s so simple to set up a recurring bank transfer, or super contribution. And then, they don’t have to worry about it again.
A small amount of cash can go a very, very long way. And we know that a structured, regular input is key.
Looking for more info? Have a listen to The Give-up, Get-back Ratio.
Dallas Davison, Michael Hogue and Ali Hogue.