I’ve thought a lot about this, as I try to really hone in on what the core principles for success are in living a healthy lifestyle (both physically and financially). Here are a few concepts you should embrace to get the greatest return on your investment — whether that’s physical or financial:
Deferring Gratification for Bigger Returns
One of the biggest indicator of success, I’ve found is how long you’re willing to defer gratification.
Thinking of exercising as painful is the same as thinking that investing money makes you poor. In the short term, exercise may be uncomfortable but if you do it consistently it gets easier — and eventually may even be pleasurable. Same with investing. You could look at putting money in your 401k or IRA as making you poor, because you could keep that money in your checking account for spending. However, while investing means you have less money in the short-term, the whole concept is that if you put that money in the right place you’ll have far more later.
Once you get a system in place, you kind of have to just trust that everything will work out and stick to the program. If you get worried that things aren’t progressing properly or getting you results, you become shortsighted and open yourself up to emotional decision making.
In fitness, let’s say you’re lifting weights to try to improve your 1-rep max squat. The process will involve you consistently lifting at a sub-maximal level for weeks, months, or even years. And you will progress. However, if you get worried that your program isn’t working — you may decide you need to test yourself. So you derail your program and one week you decide to max out (even though the program tells you not to). So you push yourself to your limit — and maybe you even hit a new record. BUT…When you do this, you stress your nervous system and derail your recovery for the rest of your training. So even though in the short-term you have improved, you’re throwing away your potential for gains and improvement in the future.
In finance, the concept is the exact same. Let’s say your goal is to have $100,000 at some point in the future. You set up automated transfers from your bank account to invest in an index fund within a Roth IRA. Naturally, your balance in your IRA will increase as you contribute to it. However, you decide to check the balance regularly. And then you notice the market fluctuating tremendously during a volatile period in the markets. Rather than sticking to your program and remaining consistent, you decide to sell your entire holding after you see the markets tick up 5% in a single day — thinking you’ll buy back in when the market drops. But then the market jumps 15% over the next few weeks and suddenly you’ve lost out on those gains. And then since you’ve lost out on that opportunity, you decide to take a withdrawal from your investment account to make a down payment on a new car (a depreciating asset).
When you arm yourself with knowledge, you empower yourself to make better decisions. And over time, those decisions lead to compounding returns. In both your physical and financial pursuits, you’re making decisions constantly.
In fitness, you constantly have to decide how much to train, what type of training to do, what you need to eat, and which goals are most important to you. If you have the knowledge or data to support every decision you make you’ll end up far ahead of where you’d be otherwise. To get ahead, you can read books, watch videos on YouTube, listen to podcasts, or read papers in exercise science or nutrition journals.
And one of the most valuable — and often overlooked — ways to learn is to track your progress and look at your most productive periods. What were your habits during the times you were making the most progress? You can learn from third-parties, but it’s also helpful to learn from your past experiences.
When it comes to finance the benefits of being knowledgable are even more apparent. While you can exercise or diet haphazardly and still see more results than someone who doesn’t exercise at all, if you aren’t consistent and disciplined with your finances, you’ll be punished. And it will be apparent. You’ll have concrete evidence — less money in your account.
There are endless resources out there on personal finance. You can watch YouTube videos from people like Ramit Sethi or Graham Stephan. You can read books, listen to podcasts, or follow experts on social media. Also, one of my favorite sources for personal finance knowledge is r/personalfinance on Reddit. It’s easily searchable, and people have asked seeming every question out there about money and investing.
Test and Optimize Your Systems
This is a concept that I was introduced to during my time working in the tech/software industry. While you can maintain the status quo and get results, you may be leaving valuable returns on the table if you aren’t looking for new methods and new opportunities for growth.
If you find your progress has plateaued in your fitness pursuits, it might be time to test a new program, increase or decrease your training volume, or try some new exercises. You should take a similar approach in your financial life. If you aren’t earning as much as you’d like, maybe you need to try a new path for making money. It might be time to go get some new skills, certifications, or connections. Your litmus test for whether something is working should be progress towards your goals. If you find yourself stagnant, you need to change your systems or you will remain stagnant.
To me, fitness is so rewarding because even though it can take a long time to reach your goals, you get clear and tangible feedback throughout the journey. While you may not run a marathon in three hours after running for a month, you can watch your pace improve from one run to the next. And that compounds into insane progress.
Finance is similar in that you do get short term feedback that what you’re doing is working — your net worth increases. But unlike fitness, you don’t get as much short term reward, because as soon as you cash in on your progress you essentially take yourself back to the beginning.