Can You Psych Yourself Up To Save More?

December 18, 2018

You have probably spent decades saving for retirement, and you might have a decade or more of saving to go before you actually retire.

At times, your resolve may be tested. The stock market may falter; household money pressures may mount; new near-term priorities may arise. What can you do to stay on point and stick with this financial commitment you have made to your future self?

First, keep picturing the future you want. Envision the dreams and goals you want to accomplish. If you want to retire to a certain place, spend a day or a weekend there. If you imagine yourself enjoying a particular hobby or pursuit, try out that pastime today. This could reinforce the importance of retirement saving at a time when distractions threaten. Second, if you are tempted to spend more and save less after a raise or promotion, think about the opportunity cost of that choice. A $100 or $500 expenditure on some consumer good poised to depreciate is not an investment in your future, but $100 or $500 invested in equities or fixed-income vehicles could result in further progress toward your savings objective. Third, automate your saving and investing, if that is not already the case, so you never have to think about it. You can do this with an IRA, not just a workplace retirement plan. Some workplace plans offer you the option of gradually increasing your contribution rate. So, instead of merely saving for something hazy called “retirement,” save for the dreams that inspire you.¹