No Excuse is Good Enough Not to Save
1 August 2006CNN’s Walter Updegrave has an “ask the expert” article out answering the question of a person who asked:
I’m 32 and earn $50,000 a year. I don’t have much money in savings nor do I have a 401(k) plan. I do have an IRA with about $9,000 in it, however, and I plan to contribute more when I have extra cash on hand. Can you give me some advice on what I should be doing so I can live comfortably when I retire?
As Updegrave points out, the plan to “contribute more when I have extra cash on hand” is no plan at all. The article goes on to give him some suggestions, such as an automatic savings plan, but I think it’s worth dwelling on this point: no excuse is ever going to be good enough as a reason not to be saving money each month - and no person is ever going to run out of excuses.
You can always think of some reason not to put money away each month. You’ll have an emergency, be forced to spend extra money on something, or just feel like splurging. For many people, the money you put aside for savings each month is what comes first - if you have problems meeting your budget, you just take away from that - because after all, you don’t see the effects for 30 years.
Thinking like this is what gets people into trouble, and it’s what causes people to end up with a retirement lifestyle far poorer than what they expected and what they’ve grown accustomed to. Automated savings is one option - it forces you to stick money away each month, and you’ll never see it. But it’s also not ideal - if you develop some discipline, you’ll have more control over what your money is saved towards, enabling you to pay back debts, pay off your mortgage, and diversify your holdings. What other ideas can you use?
1) Track your progress. Automated savings are the “stick” method to force yourself to invest - but you can also try a carrot. Show yourself how much your savings is adding up to. Do a little chart of how much you’ve put away each month, and after a year or so the difference will be very noticable. BUT - also chart where you’d be if you hadn’t put aside that money. Knowing how much of a difference that little amount has made each month can shock you to your senses.
2) Scare yourself straight. Remember, you’re trying to make sure you make the right decision when forced to choose between saving that $200 or buying a new X-box or purse or whatever. Go get a picture that evokes your worst retirement fears - try a Google image search for “Wal-Mart Greeter.” (No, I don’t have anything against Wal-mart employees - but it’s the stereotypical I-am-forced-to-work-even-though-I’d-rather-be-golfing retirement job).
Every time you are thinking about spending that money instead of saving it, take a look at that picture. Then ask yourself these questions: Do you really want to be working when you’re 70? Do you want to have to cut back on all your spending then because you can’t control yourself now? Do you want to spend twenty to thirty years broke when you should be enjoying yourself, spending time with grandkids, and generally being an old fart?
3) Match your splurging with saving. Find you can’t control yourself? Well, most people know what they’re doing is stupid in the long run - but they use rationalizations to justify doing it. “It’s just $50.” “I need a new one anyway.” “It’s actually an INVESTMENT because blah blah blah.”
Well, make a rule for yourself: you can no longer waste money unless you save an equal amount. Unless you put aside $50, you can’t buy that new $50 widget. Anything that is not in your budget requires an equal amount of saving above and beyond what you normally do. Then your new rationalization can be “I’m actually HELPING myself by spending money…”
Ideally, you’d just save the money without making excuses. But we all know that’s psychologically impossible for some people. What about you - what helps you force yourself to save? Offer suggestions on the Free the Drones forums.
One Response to “No Excuse is Good Enough Not to Save”
August 7th, 2006 at 1:50 pm
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