by Baruch Labinsky
If I asked you to guess approximately how many decisions we make a day, the chances are your answer would be way off. A few years ago Microsoft created an ad in which they claimed that we make about 35,000 decisions each day. I’ll confess I have no idea how they arrived at that staggering number which includes all types of decisions – from the most trivial to those of major importance, but the question I want to discuss is how do we ensure that our critical decisions (especially as they relate to our long-term financial health) are made as effectively and successfully as possible?
Sometimes we make small, short-term impulsive decisions when we are certain that they won’t impact us in the long-term, and are relaxed in that knowledge. However, often these minor short-term decisions, like buying a coffee on the way into work every day, or eating out just a little more often than we can afford, have long term implications that will have significant impact on our future. Our financial habits create a reality that can be hard to change. Choosing wise financial habits can form the basis of a solid long-term plan with little effort needed beyond the initial decision. Think carefully about the following decisions that you have made or make on a regular, and even daily basis.
- Savings plans. Do you have any automatic savings plans paying yourself first at the beginning of each month? The younger you are when you decide to set up savings schemes the greater your gain, as your initials savings can compound into very large sums of money.
- What is your attitude to non-essential spending? Think of that morning coffee, or extra lunch out (in the pre-Corona days). If you are caught up in consumerism and spending when young, using a significant amount of your monthly budget on non-essential services, it will be very hard to break the habit – and you then miss the opportunity to save early and grow your savings through compounding. Think twice about those discretionary ‘treats’ if your budget is tight.
- Set money aside when a baby is born. In Israel Bituach Leumi ensures that each baby has its own savings fund in which NIS 50 is added each month. Are you matching that NIS 50 out of your Bituach Leumi child allowance? This choice can double the money available to your child in a tax-free account. Have you chosen a conservative investment plan that will earn 1% or 2% annually, or are you investing looking at a more distant horizon trying to grow this long-term investment? Should you consider a lump sum investment for each child that can grow into a substantial resource in the long term? $5,000 compounded at 8% for 27 years for example, when your child might be considering buying a property, will increase to $40,000!
- Assess your standard of living. If you are constantly spending money to improve your standard of life, you are decreasing your long-term savings which may force you into the very hard position of having to downgrade when you are older.
Everyone makes decisions daily regarding steps to ensure their financial future – although some decide to avoid those longer-term decisions. Those who are young have many years to create a healthy financial future, without the stress that comes from being financially challenged when older. Whereas some people receive inheritances that can set them up for life, it is not something that should necessarily be relied on, as it is not available to everyone.
Use the points above to improve your awareness of the financial decisions among those 35,000 dilemmas you face daily as that will help you position yourself for long-term financial stability. And that will be a very worthwhile decision. Behatzlacha!
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Baruch Labinsky is the founder of Labinsky Financial, specialists in budgeting, retirement planning, investment management and pre- and post-Aliyah financial planning. Licensed by the Israel Securities Authority as a portfolio manager, Baruch specializes in working with olim who are looking to grow their wealth successfully, and is the author of the olim’s ‘bible’ “A Financial Guide to Aliyah and Life in Israel”. Contact us on 02 9910029 or email email@example.com.