Written by Shekinah Ade-Gold on behalf of Budget Leaf
Slow money refers to more complicated uses for our finances. When thinking of slow money, you can think of investments, mortgages, insurance plans and other long-term savings and retirement schemes that will allow you to use the cash value at a future time in your life. These payments are what we rely on when health emergencies arise, when aiming for home ownership, or if we would like to stop working at an earlier age.
On the other hand, fast money describes payments and expenses that are more immediate in nature. This includes getting fast food or having dinner at a restaurant, paying your bills, getting your pay cheque/ direct deposit and spending on the things you like, just because.
Slow money helps to reduce stress
Robert Irwin, in an article titled “Do You Know The Difference Between Fast and Slow Money? The Best Advisors Do” on LinkedIn (February 12, 2019) referred to a 2016 study conducted by an information technology consultation company called Cognizant. The study polled 3,074 consumers in the United States and the United Kingdom in regards to the most stressful factors they experienced in their daily lives. 37% stated that money and finances were their primary cause of stress, and the second cause, health concerns, followed behind at less than 20%. Having fast money can help you with a purchase today, but it leaves you empty-handed for tomorrow, and only those who have been investing and consolidating their assets slowly over time can rest easy knowing that they have a cash flow to rely on when they really need it.
Slow money helps you to plan for the future
An analogy Irwin uses in his article is that of a tree in our childhood home. We have no idea how much a tree would have grown in a day or a week, but years from now, we can definitely see the marked difference in growth. In this way, a young tree can years later grow to bear fruit on a regular basis that you and your loved ones will live to enjoy. This is how slow money works. There are many appropriate sayings that underscore this point, such as this one by Fabienne Fredrickson: “The day you plant the seed is not the day you eat the fruit. Be patient and stay the course.”
Fast money can lead to traumatic situations
Anyone who is not knowledgeable about how money works, or is unconcerned about planning for the future, can easily find themselves in a myriad of problems. Being able to use money wisely involves planning, but for many of us, our regular spending doesn’t necessarily include saving cash for a rainy day. This is why it is common to experience or hear about issues such as impulse buying, ending up in debt, buyer’s remorse, financial PTSD, and the list can continue. Without having a plan, the money literally comes and goes, leaving you with nothing to your name if you are not careful about your budgeting.
A Good Balance Leads To a Better Life
If you were earning a consistent amount of money – large or small – and you were able to make investments and long-term payments while putting some aside for your immediate needs and wants, there is a likely chance that you would feel much better about your life and the decisions you make. Not having to worry about the future can free our mental space to be able to make healthy choices in the present, and being able to live carefully in the present helps us to maximize our positive and negative life experiences while building a solid safety net for the future. When you can preserve your clarity and peace of mind, life becomes much more enjoyable, even when some things do go wrong.
If you’re not sure where to start, you can begin by using the 50/30/20 rule. Spend 50% of your income on your needs, 30% on your wants, and 20% on debt repayments and investments. You can reduce the amount you spend on needs and wants (fast money) if possible, but the main thing is to invest that 20% or more (slow money). Consult a financial advisor just like you would go to a doctor, and you can get the best solutions about how to do this comfortably. This way, you’re in control.