Habits are easy to form and hard to break. Both good habits and bad habits.
Eating, exercising, reading, saving, borrowing and so forth. We generally know what we should do, but too often we habitually don't do what we should do. The well being of our "future self" is sacrificed for the pleasure of our "present self." Both deserve equal time and attention, because one day our future self will become our present self.
Let's focus on knowledge and habits with respect to spending, saving and investing herein.
1- People know they need to accumulate enough money during their working years to retire comfortably and be able to enjoy a relatively stress free life in their elderly years. Yet few do so.
2 - People are also concerned about the future of Social Security and whether the benefits will be sufficient to enable them to live comfortably after retirement. And they should be.
3 - People are also concerned about our nation's financial problems and future inflation. We all should be concerned. No doubt about it.
As a result of all of the above, people are saving as much as possible and investing those savings as wisely as possible during their working years. Right? Of course not.
Retirement: Stress less, save more tells the story well:
"Inadequate retirement savings? Just worry yourself into an early
Okay, I'll agree that this sounds insensitive and simpleminded, but if it's
such a ridiculous course of action, how come so many people are following it?
Stress shortens lives. It does so in different ways; biochemically (stress
hormones, free radicals, damaged DNA) and behaviorally (over eating, smoking,
accidents). It's hard to argue that stress doesn't negatively impact health and
longevity. It also negatively impacts work performance, which can reduce
employment security, which can fuel a downward spiral.
We can't control all the sources of stress in our lives, but when we can
control one, shouldn't we?
2012 Financial Wellness Survey found that 37% of Americans surveyed
expressed concerns about being able to retire on time, up from 18% the prior
year. This is a recent survey of 1,700 working adults. 56% of them reported that
their level of financial stress had increased over the past year. A third of
these people are currently saving nothing for retirement and 40% are saving less
than last year.
So let's see: People are stressed over their retirement prospects, but 33%
are saving zero and 40% are reducing their retirement saving. Is this surprising
to you? It is to me. Of course, some peoples' backs are to the wall and they
can't spare any money for a far-away priority. We wish them well and hope their
luck turns, but that can't be the case for 73% of this random sample of American
Let's look at another study, TIAA-CREF's
"Financial security and careers in the nonprofit and philanthropic sector,”
released November 2012, which surveyed another 1,000 employees. 45% of them
are not satisfied with their retirement prospects, yet 66% haven't even tried to
figure out how much they need to save in order to achieve a secure retirement.
Why are we worrying ourselves into an early grave over something we can fix?
Here's a prescription for reducing stress: If you're currently saving zero, join
your employer's retirement plan and start saving something, anything. Start with
1% or 2% of pay or $5 per check, or whatever you can. If you're already saving
for retirement, increase your deposits by 1% or 2% of pay. Ideally, ask the
plan's adviser for help or use a retirement
calculator to see what percent you need to be saving and work in that
Don't get demoralized. It's not “all or nothing.” Do what you can do now, and
bump it up every time you can. There's an old saying that, “You should pay
yourself first.” It means that you should take a piece off the top for your own
future; payroll deduction deposits right into your retirement account. If your
paycheck can't cover all your wants, give up something else. Otherwise you're
saying that your future security is less important than a game ticket, higher
cable tier or a night out.
Moving in the right direction, even at a slow pace, will reduce your stress
level, make you happier and more valuable, and help prepare you for a long and
Taking care of the financial needs of our "future self" is as important as is taking care of our "current self."
It's not an either-or situation. They both need our careful and lifelong attention.
Yet it's a fact certain that on payday far too few of us elect to "pay ourself first" and ensure that our future self is provided for properly.
So let's all resolve to do what's right and get in the habit of saving and investing regularly and sufficiently. We owe it to ourself.
Working diligently to achieve a future state of self reliance will be a habit well worth developing.