Longtime readers may remember a few things about me:
- At various times, I've studied to be a priest, a doctor, a teacher, and a financial advisor (though I was only two of those).
- My posts can get so technical (okay, boring) that J.D. has to enliven them with cat pictures.
- I've tried to lose weight over the past couple of years, and have concluded that reducing heft is very similar to building wealth.
via icanhascheezburger.com, where you can see more Lolcats and funny pictures
Despite my midsection deflation procrastination, I have been saving for retirement since age 25, and that's when I was a teacher, so I wasn't exactly rolling in the boodle. What got me to save back then for a goal four decades hence? A fear of financial privation and loss of control. You don't want to hear my family history - and my family doesn't want me to tell you - but suffice it to say that I had a front-row seat to visits from sheriffs, property repossessions, and debt collectors when I was a young-ish fellow.
Fear might not be the kick in the rear you need; perhaps salivating over future wealth inspires you to forgo some current spending. Whatever it is, finding what motivates you is the first step.Then, as much as possible, break a long-term goal into short-term chunks. The sooner the goal, the easier this will be. If you want to pay off a credit card or buy a car in five years, it's relatively easy - perhaps using an online savings calculator - to figure out an annual or semiannual goal. For retirement, it's more complicated. I've written before about how to use a calculator to estimate whether you're saving enough for retirement. While I think such a process is useful for everyone - and crucial for anyone at least in their early 50s - the truth is that the ability of a calculator to estimate your retirement needs declines the farther you are from retirement. I have a colleague here at The Motley Fool who is in his early 40s and who has taken a different approach. He has three primary goals:
- Remain debt-free, except for a mortgage
- Pay off that mortgage in 15 years or sooner
- Invest a specific amount each month
It would be silly for me to guess what my $5,000 Roth contribution will be worth in 20 years. I can't control what it will be worth, but I can make sure I have no debt, a paid-for condo, and consistent monthly paid-in capital [i.e., money that has been socked away, which in his case will be at least a few hundred thousand dollars absent any growth whatsoever].No Potential Pain, No Aspirational Gain
The final component is accountability, which for my health goal is that $200 bet with someone who will hold me to it. After this challenge is over, I plan to keep making bets with Ben - such as I can't permit my body fat percentage to increase more than two percentage points or I owe him $200, with monthly check-ins. Otherwise, I fear it will be too easy to slide back. If you don't have a fitness expert to make you put money on the waistline, make bets with your friends or use a site like Fatbet.net. I suppose the same type of bet could be made about a financial goal, but for some reason, it seems counterproductive to make someone pay money if they're already having trouble accumulating it. One option is determining an annual savings goal, which likely also entails an annual spending limit, so you could target either one - and make bets with friends that would involve you doing something embarrassing or repulsive to you (e.g., if you're a Democrat, you put a Romney bumper sticker on your car; the Republicans get an Obama sticker; independents like me get both). Or use a site like TweetWhatYouSpend.com. Or perhaps every six months, you sit down in a quiet space, and spend 10 minutes imagining - in explicit detail - what it must be like to be in your 60s with less than $30,000. That is motivation enough for me.