Are you tired of never getting around to save more for retirement?
According to the Employee Benefit Research Institute, you’re not alone. 43% of workers have less than $10,000 in retirement savings, and every one of these people has a good reason for not saving enough:
- Medical emergencies
- Personal debts that still need to be paid off
- Unexpected mortgage interest rate adjustments
- Funding the kid’s college
It really doesn’t matter what reason or excuse you are using. Your savings account doesn’t care. No matter how logical these reasons are, they’re simply justifications for plain old procrastination.
The Problem With Procrastination
Procrastination is a time killer, and time is your most valuable asset when planning for retirement. Wealth builds not just through savings, but through savings compounded over time. When you allow procrastination to kill time, you destroy the easiest, most certain way to build a secure retirement.
For example, did you know that for every six years you delay saving toward retirement, you roughly double the amount of savings you need to put away each month to reach the same goal?
Similarly, you could start saving a fixed amount of money every year for just nine years, after which you never save another dime. Or you could wait nine years to get started and spend the rest of your life saving the same amount of money each year. In the end, your retirement savings will be roughly equal. But which path would you prefer?
The value of time is shocking, and the financial consequences of procrastination are devastating. Learning how to stop procrastinating and start saving is a critical component to a successful retirement savings strategy.
The Three Reasons You Avoid Saving For Retirement
There are three psychological factors that cause procrastination: fear, disorganization and perfectionism:
- Fear: People delay saving for retirement because they fear immediate discomfort. It is inconvenient to spend less today in order to save money for tomorrow. Retirement is so far off in the future, it easier to put it off until later rather than deal with the inconvenience of saving now. Unfortunately, the price you pay for this delay is far scarier than facing your present fears.
In the example cited above, it is much easier to save $2,000 per year for just nine consecutive years right now than it is to wait nine years and have to save $2,000 per year for the rest of your life, only to end up with roughly the same result. The immediate fear of spending less today is irrational when weighed against the long-term consequences of waiting.
After all, if you’re afraid to commit $2,000 dollars of your budget to savings for the next nine years, how can you manage to save $2,000 per year for the rest of your life? It’s not going to happen.
The key to overcoming this fear factor is to get really clear about the degree of pain you will have to endure in the future so that the immediate inconvenience is more desirable. Adopting a long term perspective will help you take action now instead of procrastinating.
- Disorganization: Retirement planning is a complicated process that requires organizational skills such as meticulous planning and accurate budgeting. People respond to complicated situations with avoidance and delay, so it’s common to respond similarly to saving for retirement.
The best way to address this problem is to take small, incremental steps toward eliminating the clutter from your finances. You can start off by creating a money log where you jot down all your income and expenses. This will provide the basis for a realistic budget.
When you can stick with a budget, you will then have control over your expenses. It will greatly reduce your risk for overspending and significantly increase your chances to save.
- Perfectionism: Perfectionism is characterized by two related behaviors: not doing something unless it could be done perfectly, and needing to finish one task before starting another. Relative to retirement planning, perfectionism causes people to procrastinate because they’re either still figuring out the perfect way to do it, or they are so busy perfecting their current lifestyle that they can’t prepare for the future.
If you are a perfectionist, the best way to get started saving for retirement now is to set the process on auto-pilot. Arrange to have a percentage of your finances automatically pulled into your savings account so that no decision is required on your part. It will allow you to focus your attention on perfecting the task you are currently working on while your savings grow automatically.
- Overcome Fear: If you’re not saving for retirement because you fear an immediate budget crunch, then you must develop a long-term focus. Saving money for retirement may not be easy now, but it will be far more difficult later on. The pain of today is easy to endure when viewed from a 20 or 30-year perspective, compared to the fear and pain it will cause tomorrow when time runs short.
- Cure Disorganization: Retirement planning is complicated so people put it off rather than deal with getting organized and figuring it out. One solution to curing financial clutter is to make a money log and monthly budget. This will help you get clear on your numbers, become organized, and figure out how much money is needed to retire.
- Beat Perfectionism: If you’re waiting for the perfect time to begin saving for retirement, the answer is “now.” Don’t wait until you get your act together and put everything in its proper place. There is no perfect solution for retirement planning, and your in-basket will never be empty. So the best thing to do is set your retirement savings on auto-pilot and just get started. Let your wealth build up on its own while you focus on perfecting your life.
How To Catch-Up On Retirement Savings – Summarized
In summary, procrastination is the single greatest destructive force working against your retirement security.
Most people achieve financial success by making consistent contributions to savings over a prolonged period of time. This allows compound growth to multiply small savings amounts into a secure nest egg. It is the easy path to wealth.
However, this strategy requires time to work its magic, and procrastination kills time.
There are three specific strategies you can apply to prevent procrastination from destroying your retirement security:
In other words, get started saving now because time is the key to success in wealth building. It is the easy, secure path to retirement security that doesn’t require you to win the lottery, become a stock option millionaire, or score a big inheritance. It is the slow, certain path to wealth that actually works.
When you build your retirement brick-by-brick starting today you are choosing a path where your financial security moves from a question of “if” to the certainty of “when”.
You can make it happen when you stop procrastinating and get started today.
Guest contributor Christa Blair writes for FinancialMentor.Com where you can learn more about retirement planning, use their free retirement calculators, or hire a retirement coach. When Christa isn’t writing about personal finance she loves to play with her Doberman Pinschers.