You may only live once, but here’s why you shouldn’t YOLO when investing

Grayson Rainier, Marketing Manager, M&G Investments

As we begin 2023, the reasons to remain positive may seem few and far between. With an intensified load shedding schedule joining a long list of economic ailments, including rising interest rates, an already-high cost of living and lacklustre economic growth, many South Africans may find this general gloom could induce a ‘You Only Live Once’ (YOLO) attitude. It’s understandably very tempting to avoid investing and to rather spend your money instead.

Not to mention that, as pointed out by Forbes recently, social media provides an easy and convenient online platform to compare ourselves with others and make quick, spontaneous purchase decisions, which only fuels this impulsive YOLO behaviour: You only live once, so why shouldn’t you splurge?

As much as the concept of YOLO may resonate, the thrill of spending is short-lived, but it can be devastating for your finances. Many people waste their money in the present day without thinking of the consequences of doing so. But in the end, they are more likely to struggle to reach their long-term financial goals, so that the future ends up being much worse than the present.

So, instead of succumbing to the pull of spending, we encourage you to set a fresh intention for this year. You only live once, so why not invest now and make the most of your future?

Let’s use a holiday trip as an example for tempting us to spend – perhaps you are already longing for your next break. We’re not saying you can’t and shouldn’t take that holiday ever. But, if you were to splash out and book it today, it might set you back R150,000. What if you took that R150,000 and invested it today instead? In an average market, invested conservatively and compounding quarterly at 7% over 10 years, your total investment would be worth R300,329.60. And compounding quarterly at 11% (which you could earn from high-equity balanced funds), your initial investment would grow to R443,981.10, enough for the trip and much more.

Find a balance

In an ideal world, you should invest for the future, while also enjoying the present. There is also a risk that when you decide to save, you end up going the other way completely and save ‘too much’, at the expense of valuable life experiences missed along the way. The old-fashioned concept of “moderation in all things” can go a long way towards helping you achieve that balance and having and following a sensible budget can be invaluable.

Timing is everything

While simple in its logic, the concept of investing for the long term is often the hardest to implement, due to other pressing short-term priorities that get in the way. However, one thing you don’t want to miss out on is the market. The longer you are invested in financial markets (both bonds and equities), the more time your money has to grow and the more powerful the effect of compounding returns, which will offer you greater freedom later on in life. So be sure to start early, with whatever—even small – amount of savings you might have.  

Make informed choices
When you do invest, it’s essential for you to do your homework before you invest your money, so that you can make savvy choices that lead to the best possible long-term outcomes for your unique circumstances. A financial adviser can help guide you in your decisions and help you avoid those YOLO impulses that may come your way. Also remember that, as you invest, you are earning extra funds that you can use to splash out from time to time and make the most out of life – you’ll be able to afford some of that YOLO attitude.  

When it comes down to it, reaching financial goals can also be seen as making the most out of life; being able to afford to live the life you wish to live.