Everyone has different ideas on how they should spend (or not spend) their money and that is fine. If we all did the same thing, our economy would be vastly different and highly predictable. However, I hear a great many people say they can’t get ahead or can’t afford to save, whether for a rainy day or retirement. My question back to them is how can you not afford to save?
In an earlier post, I talked about how difficult it was to save and all the mistakes I made. It was difficult for me to get started as well. I did not start contributing to my 401(k) plan at work until I was 25 years old. I always had an excuse, yet when I lived in Southern California, I always had designer clothes from Abercrombie & Fitch and was eating out quite often. Keeping up appearances and going out was my thing back then and my income was much lower that it is today. So many people, especially younger ones, spend to keep up with their friends, coworkers, and even strangers they are somehow trying to impress for no known reason.
There is always something to spend on, but you have to make saving a priority. Most who don’t save likely don’t budget. Having a clear vision, or some kind of long-term idea, of what you want to see happen with your money over time is the first thing on the saving to-do list. You don’t just save for the heck of it! Life is short and you really need to have goals set. Retirement may seem like it will never come when you’re younger, but trust me, you will wake up at 35 or 40 and suddenly remember your 10th or 20th birthday. You are now 20 or 25 years away from 60, where you could retire on a 401(k) or Individual retirement account if you had enough saved. Time will march on and you need to be ready.
If you can only save for one thing, save for retirement. Social Security is not enough for most to live on today, and according to the Social Security Administration, benefits will likely erode over the coming decades. Health care will likely need to be a larger part of your budget as you get older if you want a good quality of life or to live a long life. I have learned from my mother and her recent change to Medicare still requires a supplemental plan to not have prescription drug costs and other procedures wipe out her savings over time. While the plan is affordable, it is an additional line item many don’t have today.
For those who make it to their golden years and have issues with retiring due to income, the problem isn’t whether they invested in mutual funds, stock index funds, or some other diversified way of building wealth, it’s that they didn’t put money aside to grow. That is why this article is called It takes money to make money, because if you do not put anything aside, just like if you don’t plant seeds in the spring, you will not have a harvest to reap later on.
Make a small sacrifice of three to five percent of your income and your older self will thank your younger self in your elder years. It’s never easy to cut back or see your take-home-pay shrink, but you are actually just delaying pleasure. That money will be there in the future, except it will have grown much more than what you originally contributed. If something happens to you before retirement, you will be leaving a legacy for your spouse, kids, or whomever you designate as a beneficiary.
What was your turning point? What made you start saving for retirement? Was is being automatically signed up for your employer’s 401(k) plan, or did you make the decision consciously? If you aren’t saving, what is your reasoning? Please leave me a comment. Thanks for reading!