Imagine if you could travel into the future and see yourself 20-30 years from now. Do you think it would change the way you live your life now? If you saw yourself battling lung cancer, would you instantly quit smoking? If you saw yourself with a long scar on your chest from bypass surgery, would you start to eating healthier? If you saw yourself still working with no end in sight, would you start saving more now? The problem with things like smoking and lack of saving for retirement is that the negative effects always seem so far away. Your paycheck is right in front of you now; why would you want to put it away for 30 years? Can you even imagine yourself at 60 years old? Do you look at the 60 year old you as the actual you? I believe that a big problem is that people consider their future selves as different people, and that your bad habits now will only effect that future you. Or people will rely on the future you to do the hard work, such as going to the gym, or quitting smoking. Let's try and get rid of that disconnect.
Stop waiting
I hate New Years Resolutions. What percentage of people who make resolutions actually stick to them? Fitness Centers must love January. Thousands of people sign up to memberships and instantly feel better about themselves because they signed up. Then they might workout a few times, then never cancel their membership because it's easier to get a home loan than to cancel a gym membership. Resolutions are the Instant Gratification King. It feels so good to draw up that list of self improvements in December, but when the moment of truth comes, most of us fall flat. If you want to stop smoking, start TODAY. If you want to work out more, start TODAY. If you want to start saving for retirement, start TODAY. Don't put it off and hope the you of the future has more will power than the you of the present. You're the same person, so if you don't want to start saving today, you won't want to start tomorrow either.
Think about retirement ALL THE TIME
Do you remember hearing people tell you "start contributing to your 401K, and then forget about it". I believe that you should think about retirement every single day. I check to see if I can retire every single day. That's no joke. Shower, Coffee, Breakfast, Retirement Fund. That's my morning ritual. It helps me stay focused on my goal, keeps me up to date on the market info, and shortens the distance in my head to retirement. If you can see the finish line in front of you, you'll run faster.
Get used to your new income
The money that you set aside for retirement does not exist anymore. If you run into money problems, turning off your 401K is NOT an option. Imagine that you just had you wage decrease. It's so tempting turn it off every time you want to buy something new. The problem is that one month turns into several, and suddenly it's been over year and you haven't saved at all. If you're 25 years old, make $50,000/year, and contribute 10% of your income to a 401k, you should have $1.183 million by age 60 (assuming an 8% return). If you wait until age 26 to start instead, you drop to $1.089M. That's almost a 100k drop because of just one year. Long story short (too late), turn on your 401k, and adjust your standard of living accordingly. If you have trouble making ends meet, you either cut expenses, or get new income sources (legally of course).
Disconnected from future you
Disconnected from future you
There is a disconnect in most people's mind about the you of the present, and the you of the future. It's easy to forget that you are the same person, or that you'll ever get to 60 years old. It's easy to tell yourself that something will will change between now and then, and you'll start saving, quit smoking, or win the lottery. Wake up. Nothing is going to change until you change it. Don't set a date, don't put it off. Turn on your company's 401K, start a Roth IRA account. Do it right now!
Big thanks to Personal Finance Whiz for including me in his top posts of the week!
Big thanks to Personal Finance Whiz for including me in his top posts of the week!
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