Small changes over the long term can make huge differences to your financial progress that are intuitively underestimated.

Let’s take someone on a salary of $70,000. Assuming average inflation of 2.5%, and pay increasing with inflation, their pay in the first year will increase to $71,750.

Compare that to someone who receives just one 4.5% pay increase (instead of 2.5%) whose second year pay is $73,150. An increase of $1,400.

Many people will think that is great, but maybe not life changing. But the benefit of time means that is not only an extra $1,400 for one year, but that $1,400 extra then compounds over time to end up as over $61,000 more over 30 years.

Or if instead of one one off 4.5% pay rise, how about consistent pay rises each year of just 0.5% above inflation for 30 years. A difference in year two of just $350, but over 30 years a difference of $280,000.

The same effect can be seen if you decrease your annual expenses by small percentages.

If you can, keep your expenses optimized and fight for your worth in your choice of employment. Even small amounts over long periods can make all the difference. The one off slam dunk is not always required.

The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here