Saving for retirement is greatly important for being able to have choice later in life, but is also difficult for many in generations X,Y, and millennials because it isn’t a defined and pressing need. Many leave school without spending too much time on learning financial literacy because our schools simply don’t teach that as a life skill any more. So being told to save for retirement, even when using retirement calculators, is this nebulous idea that isn’t really taken into consideration for people in their 20’s and 30’s. With that in mind, I wanted to give you a few things to consider when creating savings goals.
Lifestyle Choices: Living beyond your means is a huge factor in not being able to properly save for your retirement and financial well-being later in life. This idea of “Keeping up with the Joneses” that’s prevalent in our society can have a drastic negative impact on your finances if you’re recklessly spending money that should be allocated towards savings and investments. This is particularly true of doctors and nurses who emerge from training and start to make good money, they are likely to spend it instead of coming up with a plan to maximize what they’re now earning.
Plan Your Savings: You need to be intentional about how you’re saving, what you’re saving, and where you’re saving it. A major foundation of any financial plan is formulating your goals and creating ways to reach them, because having a broad goal like “retirement” will lead you to pursue methods that may or may not be beneficial. Making sure you’re clear in your mind about what your goals are will allow you to more effectively reach them through planning.
Curse of Instant Gratification: Another large hurdle in making savings a priority is the desire for instant gratification. With online shopping and credit cards, it’s easier than ever to make impulse purchases without fully thinking about the consequences of that action. A way to prevent this is to make a list of wants and make sure you’re saving up for that purchase, instead of purchasing it now and dealing with the lack of funds afterwards.
Creating good saving habits is a skill, and like any skill it can be practiced and perfected. The important thing to realize is that the decisions you make now will affect the choices open to you later in life, and it’s far easier to practice the skills of saving now then it will be in 20 or 30 years when you don’t have a choice. Contact me if you’re interested in setting up your goals and finding ways to reach them.