Tuesday Tidbit: How to Grow Your Wealth and Health

As we discussed last week, becoming wealthy isn’t easy. Neither is being healthy. Accumulating wealth, like a disciplined diet, requires us to make hard choices in the moment. We have to prioritize our future selves over our desire for instant gratification. There is a recipe for success that applies as much to a strong diet as it does a solid investment plan. It has two main ingredients: automation and friction.

When to Choose Your Lunch — It’s 12pm, you’re starving, and every online menu looks amazing. Are you really going to choose a salad over a burger and fries? I’m certainly not. But if you packed your lunch the night before, you’re much more likely to make a smaller, healthier lunch. Plus, by meal planning you eliminate the difficult choice in the moment because you automated the decision.

Use Friction to Your Advantage — In the book The Happiness Advantage, author Shawn Achor talks about the power of friction. To reduce his bad habit of watching too much TV, he dialed up the friction by removing the batteries from his remote and putting them in a drawer across the room (I may have done this myself just last week to cure my bad habit of watching TV before bed). Conversely, when Achor wanted to exercise more, he decreased the friction of a good choice by laying out his workout clothes next to his bed the night before.

Making Wealth Easier — The more good decisions we have to make to be successful, the greater the chance something goes awry. To tilt the odds in our favor, we need to reduce the number of good decisions necessary — reduce the friction. Setting up an automatic transfer from your paycheck to your savings accounts, 401ks, etc. is a terrific example. In my experience, the best savers prioritize setting a savings goal first, then live on the rest. You can also establish an automated rebalancing plan so you don’t have to make the difficult decision to sell winners and buy losers in the moment when our emotions can steer us in the wrong direction.

By adding automation and using friction to your advantage, individuals can increase the chances of achieving their goals. At the same time, they can eliminate the need to make decisions in the most emotional, irrational moments regarding both their wealth and health. For investors, the foundation of this strategy should lie in their financial plan. More on the importance of your financial plan next week.

Weekly Tidbit Quote: “Changes that seem small and unimportant at first will compound and turn into remarkable results if you’re willing to stick with them for years.” — James Clear, author of Atomic Habits

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John Fischer, CFA®, CFP® | Chief Investment Officer
Mosaic Family Wealth
john@mosaicwealth.com | MosaicWealth.com

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