We really are the culmination of what has happened in the past.

What we are today is the result of all our past decisions. What we chose to do and chose not to do. What happened and did not happen. Everything about us is simply a lagging indicator of the past.

Our wealth is a lagging indicator of what we have earned, how we have spent, how much we saved, and where we invested that money.
Our health is also a lagging indicator or what we eat or don’t eat, what we drink or don’t drink, whether we exercise or not, and our genetics.

Your habits create a trajectory.

In the book Atomic Habits, author James Clear gives a vivid example. A pilot flying an aircraft from Los Angeles to New York adjusts the heading just 3.5 degrees south. It won’t be evident at take-off, when the airplane is just a few feet off the ground. But over the distance (which is around 5-6 hours) it will get magnified and the aircraft will land in Washington instead of New York.

Nothing happens overnight. Whether it is trying to lose weight, stay fit, or create wealth. This is why trajectory is more important than immediate results.

This is why you should not get comfortable just because you have a high income. Instead, check the trajectory of your net worth. Is your net worth increasing as your income rises? Are you saving and investing more when your income increases? Net worth captures something income does not: accumulated decisions over time.

Time makes a big difference.

Time magnifies the margin between success and failure. It will multiply whatever you feed it.

Put money in a cumulative 5-year bank deposit. You get interest upon the interest. That is compounding. Time makes compounding do its work.

Our habits compound too.
Good habits compound well-being, bad habits compound misery.

Eat junk food just for a day, there is no noticeable difference. Do it regularly and it will show up.
A day in the gym won’t show results. But an hour in the gym, five days a week, will definitely have an impact.

Good habits make time your ally. Bad habits make time your enemy.

Selling a stock and making a good amount will make you feel great temporarily, but won’t get you wealthy. But how you behave over time will decide whether you get rich or stay poor. If you continue to invest systematically during a bear market, and don’t sell in panic during market upheavals, time will be your ally.

Don’t ignore small changes.

In another example from Atomic Habits, the author tells us to imagine a cold room with an ice cube on the table. It is 25°F. The room gradually heats up: 26°F, 27°F, 28°F, 29°F, 30°F, 31°F. The ice cube sits there. At 32°F, it begins to melt. A 1° shift (from 31 to 32), seemingly no different from the temperature increases before it, has unlocked a huge change. Breakthrough moments are often the result of many previous actions, which build up the potential required to unleash a major change.

We magnify defining moments in our life. But it is the small consistent habits that position us for those defining moments. Phenomenal success doesn’t require drastic action; it requires consistency. I am reminded of what Lionel Messi once said: “It took me 17 years and 114 days to become an overnight success”.

Remember these financial habits:

• Financial habits, however small and insignificant, are what will put you on the right trajectory towards financial stability.
• Set aside a fixed amount to invest systematically every month. You can select a mutual fund(s) for the investment. The money will be automatically debited from your account with no effort from your part. This will take away the emotion from investing and whatever be the state of the market, your investment will be regular and consistent.
• If you already have systematic investment plans (SIPs) into mutual funds, and need a fixed-return investment, you can open a bank recurring deposit that automatically saves a fixed amount every month.
• If you find yourself eating out a lot, and cannot eliminate it, at least reduce it. Go out to eat only on the weekend, and during the week order in via Swiggy/Zomato only once.
• Build up an Emergency Fund. Let’s say that you estimate your Emergency Fund to be Rs 5 lakh. You won’t be able to instantly create it, but start building it up slowly.
• Don’t act on emotion. When the market drops, don’t sell your investments in panic. Let them be. When the market turns, they will be well positioned to benefit.
• Don’t buy stocks on tips. This is the fastest way to lose money. Understand what you are buying (mutual funds or stocks) and why. Do your homework.
• Don’t wait for tomorrow to start investing. The earlier you start, the greater the impact compounding has. Time works in your favour. So however small the amount, start investing.

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