Why We’re Saving—Then vs. Now
- Identify a specific endpoint. Researchers have found that the more specific the goal is, the better your chances are success. Dr. Joseph Kable, a neuroscientist and co-author of one study, told Forbes that uncertainty about when the end goal will arrive is a key factor in why people get sidetracked. “The best way to persist toward a big financial goal is to make the goal as concrete as possible,” he said.
- Create a specific plan for getting there. Instead of just having an awareness of the need to save, it’s important to know exactly how much you need and how long it will take to accumulate it. Experts say that taking the time to do the necessary calculations is critical to ensuring you have enough available if a need arises, and a financial planner can help you.
- Make it manageable. You know what they say about eating an elephant—just one bite at a time. When it comes to dealing with long-range goals, the same approach is needed. Instead of focusing on the 30-year total, focus on what you need to save this month to stay on track toward that specific endpoint. Research shows that you’ll save 78 percent more money by doing it.
- Evaluate your progress. In order to make sure you’re staying on track, it’s important that you evaluate your progress on a regular basis. This will give you the opportunity to see if adjustments need to be made and help you correct what isn’t working and replace it with something that will.
- Get started and stick to your goals—it’s never too early or too late to bulk up your nest egg.
- Contribute to your employer’s retirement savings plan—which will lower your taxes and help you benefit from any employer match.
- Leave your retirement savings alone—making the most of compounding interest and avoiding penalties for early withdrawal.
- Contribute to an Individual Retirement Account (IRA)—which allows you to tuck away a minimum of $5,500 a year, and more if you’re over 50 years old.