Why small financial wins matter.

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A friend once asked me if I would rather have £1 million today or a penny that doubled every day for 30 days. We were doing a money course together and I immediately  opted for one million today. She then told me that I would have missed out on over £4 million, well £4,368,709.12 to be exact.

I was stunned and had to look up the calculation before I believed her. She was right and actually as she had worked for a firm of accountants I don’t know why I had to check!

It was fascinating to look at how the penny amount would grow. At the end of the first week  you would only have 64p. By the end of week 2 it would be £81.92. By week 3 It would be a more respectful £10,485.76 but that’s the thing about exponential growth, nothing seems to happen for a long time and then whoosh it all arrives in the final week.

I began to wonder about how many other places this operates and how many times I have given something up because it didn’t seem to be working.

There are many examples of where slow starts are encouraged. If you look at programmes to start you running they all begin with just a few minutes each day and you gradually build that into a marathon, well some people do!

How does this apply to money?

When we have a financial goal we usually divide the amount by the length of time we have to achieve it. For example, you want to save £10,000 over a year. So you divide 10,000 by 12 and come up with £833 that you have to save each month. If that feels possible then you start saving towards your goal.

But what if it doesn’t?

Discouraged, you may decide it was a fanciful, unrealistic goal and forget all about it. But when you look at exponential growth, you can see you don’t have to save in linear amounts.You could start by putting a small amount to one side. Maybe just £100 in the first month and then increase it to £125 in the second month. Then increase to £150 in the third month.

Taking small consistent steps will progress you towards your goal. The most important thing is to start. It might take you six months to save the first £1000 but that is £1000 you have behind you towards your target that you wouldn’t have without your small steps. Most importantly, you are building something.

With the confidence of the first £1000 behind you, you can pick up the pace and keep saving towards your goal. You’ll surprise yourself with what you can achieve with these small financial wins.

Now we’ve explained why small financial wins matter, the next step is taking time to celebrate them! Imagine how exciting it will feel to watch a sum of money growing and to look forward to checking your balance. This is a feeling you need to take time to celebrate every month.

Above all remember it’s not the amount, it’s the action. You are setting up a new pattern of behaviour and it’s better to start small and keep going than to sprint the first 100 meters and run out of steam.

Surf that exponential.