As humans we can be inherently lazy – we want the best possible outcome with the least amount of effort and, in our modern society, we have many ways to achieve this.
If you want food, you can get a meal delivered to your door – no shopping, cooking or cleaning necessary. If you want effortless entertainment, you switch on the TV and have a remote control to change the channel without leaving the couch. We don’t write letters anymore, we now have emails, SMS and many other forms of easy, quick communication systems at our fingertips.
Now that’s not to say that every person is lazy, and we can certainly achieve great things that take effort. However, if there is an easy option to achieve a desired outcome then we will generally gravitate towards the path of least resistance. This is known as the law of least effort.
I am not here to talk in depth about the intricacies of this law, but what I am interested in is how it can be applied to our financial lives. Setting financial goals is easy but developing and executing the strategy to achieve those goals is the difficult part.
I often say, financial planning is part art and part science. The science is the numbers. It’s about calculating how what you need to do to achieve your objective. And numbers are great because they are black and white, the numbers don’t lie.
The art side of the equation is how to implement the science, and this is where the law of least effort comes into play.
If I gave you a financial plan that required you to sit down and manually work on the plan each week for the next 10 years, I’d bet good money that you will fall off track. Motivation would kick start you in the beginning, but the motivation would slowly fade, and you will go astray.
On the contrary, if I gave you a plan and, as part of that plan, we automated the implementation as much as possible, then you are significantly more likely to see that plan through because you won’t have to do anything! You will be achieving the desired outcome (your financial goal) with minimal input.
Let me give you a few examples of how this can work:
- If your strategy is to pay down debt, set up a regular direct debit from your cash account into your loan account so the additional repayments happen automatically.
- If you want to put more money into super, consider a salary sacrifice arrangement as this is a set and forget strategy. Once you set it up with your employer, the additional contributions will continue to go in before you even get paid.
- If you want to invest more, there are many systems available whereby a regular investment amount is debited from your account. This is one of the reasons why micro investing apps such as Raiz have been so successful as they help people invest without any knowledge or effort (this is not a recommendation to go get Raiz, it’s merely an example).
That is just three examples of many as to how you can automate your financial plan to adhere to the law of least effort and make it more likely that you will achieve your financial goals.
You’ll find that as you set up these regular instructions for your money, your spending’s typically fall into line as well, without the need for a budget. You will have less money available to spend as more is allocated automatically to where it needs to be. What’s left over, is your spending money. I hope this gave you some food for thought when it comes to the implementation of your financial plan. If you make it easy, you will be more likely to stick with it over the long-term and therefore have a greater chance of achieving your financial goals.
