Do you ever make lists of all of the things you intend to do but haven’t quite gotten around to? Get back to the gym, go on that trip, start seriously saving for retirement. Whatever it is, it seems that after a few weeks, the list goes back into storage, only to be carted out and dusted off the next time you feel ambitious about getting back to your intentions.
Wanting change and enacting change are two different things. We know we want to lose weight, but the process of changing our lifestyle, modifying our diet and making room in a busy schedule for exercise can seem daunting. Humans are complicated that way. The benefits of completing the goal are not enough incentive to stick to it. We know we need to save for retirement, we know we should be managing our finances, investing and working toward our long-term goals. But, like the grasshopper and the ant, it can be hard to focus on the future when there is so much in the present that grabs our attention. This is called “present bias” and it causes us to spend at the moment instead of stashing more funds away for the future. [i] But when 51% of affluent investors, those who have investable assets over $500,000, fear being financially insecure in retirement and only 56% of American households even have a 401K, it’s definitely something we should be striving toward and discussing.[ii] So, in this article, let’s explore how to get from creating an intention to actually accomplishing it.
Looking way ahead can be daunting. For some, it may seem like they have plenty of time and don’t need to worry about their savings. For others, it may feel like they are too late, and the prospect of retiring without security is too stressful to dwell on. Wherever you fall on the scale, the reality is that long-term investing covers a long period of time, it’s a long road and will have peaks, valleys and sometimes detours. To get started, you need to set some goals and design steps to help to reach that goal. With every small step met, comes a feeling of accomplishment and of momentum toward a goal. Studies show the best way to meet a major goal is to set up small sub-goals along the way.[iii] That way, day by day, penny by penny you are moving forward, accomplishing sub-goals on the way to the bigger ones. Think of it like climbing a mountain, or running a marathon, with each encountered checkpoint there comes the knowledge that you are one step closer to the finish line. Simple things like creating a realistic budget is a good place to start.[iv]
Plan for Challenges
Even the best-laid plans will run into obstacles and saving long term is no different. No one can predict the future, but what we can do is anticipate a myriad of situations and make plans for how to deal with them. The more you prepare for troublesome eventualities, the better you will be able to deal with the unexpected. A health crisis, an emergency, the loss of a job are just a few examples of the hurdles you may encounter. You may encounter a situation where making a large purchase and pulling the funds out of a retirement account for example. You will need to weigh the pros, making the purchase and the cons, the tax implications of dipping into your retirement savings.
Create an Honest and Realistic Plan
It’s important to have realistic goals. And planning for your retirement is no different. Regardless of income, a budget can benefit any household to help minimize waste and maximize your efficiency.[v] Oftentimes people underestimated their daily cost of living. One main reason is to under-plan for the number of special occasion costs: wedding gifts, dinners out, trips etc. Another is not spending enough time beforehand really looking at your life, your job, and what you really want at the end of the day.
Once you’ve established who you are and what you want, the next step is how. And the best step forward there is a very small one. The reason big goals and resolutions tend to fail is that a few misses and the goal seems hopelessly out of reach. Long-term goals that are years, even decades away, can easily move back into a ‘next year’ goal. This is the best argument for setting up much smaller sub-goals and checkpoints. Hitting a few of those, getting some wins, can really create momentum and confidence.
Now that you’ve created a major goal and a series of smaller sub-goals, what obstacles could get in the way of them? And how can you circumvent them? If sticking to a budget is your challenge, or spending too much in the present, then discussions with a financial advisor may be useful. For some, auto-depositing directly from paychecks helps with out of sight, out of mind aspect of savings. Another obstacle may be an unexpected emergency or expense. To combat that, perhaps creating sub-goals of creating an emergency fund in tandem with long-term savings may help with that.
Making an Intention a Reality
You want to meet your goals. We all do, and it is never a great feeling to leave a solid and meaningful intention unresolved. Treating long-term financial goals as something attainable by breaking them down to smaller mini-goals and checkpoints, while also creating realistic budgets and planning for potential hurdles along the way can make the dream of retirement savings a reality. Then perhaps in a few months, you can tackle that intention to go to the gym 5 days per week!
Contributing author Illuminated Advisors
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Carolina Retirement Planners, LLC. are not affiliated companies. Neither the firm nor its agents or representatives may give tax advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions.
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