You actually can learn from TV advertising!
FRAM ran a series of television ads in the early 1970’s (click here to watch one) with the catch phrase, “You can pay me now, or pay me later.” If we neglect spending a relatively small amount of money on a quality oil filter, we will certainly pay a much larger amount on the engine later. The principal is easily applied to the allocation of income. We can save smaller amounts of money in our younger years or we will suffer for not saving it in our senior years! Unfortunately, as Anne Tergesen wrote in The Wall Street Journal, “Given a choice between satisfying our immediate needs and desires or focusing on the future, the here and now typically wins out. That impulse doesn’t bode well for retirement savings.”1
Wagyu beef or wag your head
The sad fact is, we often get lost in our immediate actions and have no idea of their longer term impact. John Schmoll of Frugal Rules presented an example of a family of three who discovered that they had spent more than $30,000 on eating out and $200 on unused gym memberships in 2016!2 While this situation may be extreme, the existence of the ability to defer the actual cost of things with a credit card invites us to indulge and overspend now. Our focus becomes the ability to make a monthly payment rather than the long term wisdom of our decision. Without giving it a thought, many families create situations where current monthly credit card payments make it virtually impossible to save for retirement.
Create a family culture of thrift
According to the Center for Retirement Research at Boston College, “The savings crisis is deepening as 52% of American households are at risk of being unable to maintain their standard of living in retirement.”3 The trend is worsening as well. In 1983, the figure was only 31% households. The National Institute on Retirement Security estimates that 45% have no retirement savings at all.4
The best way to reverse this trend is to begin creating a culture of thrift for your family. It is unrealistic to expect the family that spent more than $30,000 in one year eating out to stop cold turkey. However, it would be sensible to begin by increasing the dinners eaten at home by 3 per week. Searching for other realistic opportunities might reveal smaller savings such as drinks. Cutting out a weekly latte, or drinking water for dinner rather than a soft drink, may easily produce another $5 savings per week. Such decisions will not only provide funds to reduce debt and increase retirement savings, it will help establish a habit for their child and their future family.
Can saving $15 per week really make my retirement easier?
The answer is a resounding YES! If a 22 year old college graduate saves $15 per week, it would provide a lifetime monthly income of $860 beginning at 65 through the Christian Churches Pension Plan. Should someone 30 years old begin such a discipline, the lifetime monthly income produced would be $595! The key is to begin the process now! An oft repeated slogan about athletes is, “Father Time is undefeated.”5
1 In Retirement, It’s Save Now or Pay (a Lot) Later. The Wall Street Journal. January 20, 2017
2 http://www.frugalrules.com/spent-30000-eating-out/?utm_source=dlvr.it&utm_medium=twitter
3 The Wall Street Journal op. cit.
4 The Champions of the 401(k) Lament the Revolution They Started. The Wall Street Journal. January 2, 2017
5 Bleacher Report’s Midseason NFL All-Pro Team. Gary Davenport, Featured Columnist. October 30, 2014