When I was younger there was a commonly shared story about how foreign nationals crossed the river to get to South Africa. It was a fascinating story because it sounded both plausible and implausible at the same time.
The story went as follows: Migrants would simply get on the back of a crocodile, holding a piece of wire with some meat strapped to the end of the wire. While the crocodile tried to hunt the meat, its passenger would be transported to the other side of the river. And that’s where the story ended. We never found out what happened when the passenger got to the other side of the river.
Something about this story stuck with me for my entire life. It wasn’t until 20 odd years later that I found the meaning of that story.
The whole scenario illustrates how we generally experience life and chase goals. Doesn’t life sometimes feel like you keep on chasing something you cannot quite get to? At times, the closer we get the further the meat gets away from us.
I recently realised that I’m actually the crocodile chasing the meat, and life is the passenger holding the meat. However, the “meat” I’m chasing keeps on changing. Part of my epiphany was that it’s not like I’m not getting to the meat. It’s just that the meat keeps changing.
Let’s apply this analogy to investing. Most of us have a target retirement number, and we’ve conjured up well-thought methods of justifying that specific number. For instance, we multiply our monthly expenses by 300 to get our retirement number. This number becomes the metaphorical “other side” of the river. In other words, our goal. This method, albeit valid, is based on the assumption that we will maintain our spending habits and value the same things between now and our future selves.
Though not perfect, it at least gives us structure and something to aim at. Just as the passenger who kept the crocodile focused on the process of hunting the meat to reach the other side of the river.
Short term goals
However, we also need process-oriented goals to bring us closer to this long-term goal. We should almost forget about the long-term goal, and allow these smaller, short-term goals to take us closer to the long-term goal.
As the meat of our goals evolve and change, especially over the long-term, we should perhaps consider focusing on process (and progress), as opposed to a retirement number. This will also help us judge whether these smaller process-based goals work.
What does this all mean for personal finance? It means putting all your focus into developing the habits that will bring you closer to your long-term goal – whatever it may be. Because the “meat” we chase in life changes with time. Every time you save money, invest it and pay off debt. The habit of paying yourself first pays back in the long run, whatever the future has in store. Reaching these very important short-term goals can bring you closer to any long-term number.
Cash Club blog
Njabulo Nsibande is a Just One Lap user-turned-contributor and a founding member of an investment club. His “Cash Club” blog details his experiences balancing the financial obligations of a young parent with his investment aspirations.
Follow Njabulo’s journey here every month. You can also follow his trading journey by listening to his Village Trader podcast.
Find him on Twitter: @njabulo_goje.