Incremental Steps

Someone has said that when it comes to health, the first 50 years are a gift. After that you have to earn it. According to my last doctor’s visit, I’m late in showing up for work. So I have started walking. Some days I do what I call the “Neighborhood Loop.” Other days it is the “Neighborhood BIG Loop” or the “Benson Loop.”

A few days ago, I was asked about my goal for the number of steps in a day. The question puzzled me at first since I didn’t have anything in mind. My FitBit dashboard by default says I should be walking 10,000 steps a day. That seemed unlikely when I started since my record to that point was woefully shy of such a lofty goal. To aim so far above reality seemed to stifle motivation just when I needed a boost.

In the days after that conversation, I decided that my steps goal for the current 28-day average is to be higher than the previous 28-day average. As of this morning, I’m tracking at fifteen percent above average. Mind you, I still have a ways to go to walk over 10,000 steps on a regular basis, but I’m moving in that direction. Attention to putting in a few more steps each day is starting to pay off.

Financial Decisions

A similar principle applies to financial health. Suppose a 35-year-old plans to invest $100 per month for retirement. Let’s assume a 6.86 percent return (the average return rate of the stock market from 1871 to 2015, adjusted for inflation). When this person turns 65, the account would be worth $118,680. But if our investor increases his deposit by $1 every month ($101 the second month, $102 the third, $103 the fourth, etc.), the value in 30 years would be $263,310. That is about the same as the current estimate of healthcare costs for a couple in retirement. Adding just $1 per month—one dollar!—increases the balance in the account by $144,630 over 30 years.

When my wife Judi was in high school, one of the newspapers in Cleveland published a list of millionaires. One million dollars in 1970 is like six million dollars today, so we’re talking about a lot of money. To the surprise of everyone living on Miami Road, one of their neighbors was on the list. They watched this neighbor mow his own lawn in the summer and shovel snow from his driveway in the winter. His car looked like all the other cars on the block. His wife visited the same clothing stores as other mothers doing back-to-school shopping in late summer. Nothing about this family shouted millionaire.

Thomas Stanley and William Danko describe this type of household in their book The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. Very few of the high-net-worth households in their study inherited their wealth. Instead, most of them worked diligently and spent much less than they earned.

The authors go on to describe the financial decisions of the persons in their study. As they go from example to example one thing is clear: financial stability results from consistency with decisions about the little things. Over time, something substantial emerges from incremental steps.

I could easily spend $15 at my favorite café for a kale chicken salad and a low fat strawberry smoothie. Or I could pack my own lunch, put the money I would have spent into a retirement fund, and take a small step toward a more secure future. Rather than purchasing the book for which I just read the raving review, I can borrow it from the library, even if I am number 163 on the list of those who have placed a hold on the book. Instead of paying $30 for a new thermal shirt to wear around the house on chilly winter mornings, I can get an almost new shirt for $2.25 on half-price-sale day at the thrift store. These are the kinds of decisions Stanley and Danko describe as being effective in creating financial security. Attention to the little things makes a big difference.

Originally published by Pensions & Benefits USA.