I recently escaped Melbourne’s winter weather and spent nine glorious days on the Indonesian island of Bintan. One of the highlights was practicing tai chi overlooking the beach at sunrise. A few short days was insufficient to master this ancient martial art, but there was much to learn from even this brief exposure, and well beyond the movements themselves.
Tai chi is about finding a firm foundation to allow you to move forward with strength and confidence.
In modern life, we are so often in a hurry to get to our destination. We want to quickly push through obstacles to move ahead. However, the philosophy of tai chi recommends retreating to a solid foundation and firm connection with the ground before moving forward. To the beginner the approach can seem slow and convoluted, but it soon becomes apparent the compensation is strength and confidence.
The same lesson can be applied to our money. We often want to forget about the past and look for the next financial win. A hot stock tip, a heavily discounted home loan rate or clever tax-saving strategy in isolation can seem like the short cut to getting ahead. However, first pausing to ensure your entire financial house is in order builds more sustainable wealth.
Here are some tai chi-inspired tips on how to retreat to move forward financially:
1. Pay down ineffective debt
Particularly high-interest rate credit card debt. It can be easy to delude ourselves that credit cards are not a problem, particularly if the minimum payment each month is not onerous. But high-interest rates in excess of 11 per cent a year, can quickly compound to increase indebtedness. Credit card balances that are not cleared monthly are often a reflection of unsustainable spending. It might feel like going backwards, but focusing on completely clearing all credit card debt, retaining just one credit card with a limit of no more than your monthly take-home pay, is a great way to lay a strong financial foundation. There are some great tips on how to win the battle against overspending by credit card survivors such as Elesha Piper and on the MoneySmart website.
In life we often measure our personal progress by the size and value of the things we accumulate. However, to move forward financially sometimes it can be best to take a step backwards and relearn how to live with less. Think about becoming a one-car family, not only to have cash from the sale, but also the ongoing saving on registration, insurance and maintenance. Similarly, with your home, it might seem like a big step, but downsizing to pay off debt and reduce overheads might actually be a great way to make real financial progress.
3. Career sidestep
When people are made redundant they are generally devastated. However, it is amazing how often being forced from the security of a known job, results in new positive opportunities. Don’t wait for external events to shape the course of your career. Think about quitting a job you hate to find work which extends and engages you, even if the initial salary is lower. Starting your own business can feel like the ultimate backward step, as a new business will not only have no income, but the establishment costs will also deplete your savings. However, if you are exploiting a unique business idea or pursuing something about which you are passionate, the initial retreat may result in an attractive long-term pay-off.
4. Become a beginner
We all want to feel accomplished and for others to recognise that we are successful. However, there is significant value in trying new things in which you are yet to develop expertise. For example, if you have mastered property investing but have never tried the sharemarket, consider immersing yourself in a quality share-investing course. If you are very experienced with listed securities, perhaps learn more about early-stage investing. Ultimately the type of investments you make may not change, but you are likely to acquire new skills, gain fresh perspective and humility.
Retreating, regrouping and ensuring that we are operating from a robust foundation is a valuable lesson from eastern philosophy that is very relevant to our modern financial lives.
Catherine Robson is a financial planner at Affinity Private. Next week: Georgina Dent.
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