The path to financial health shares many similarities with the path to physical health. Perhaps the most important shared trait between the two is that of discipline. You don’t get a physically healthy body by running 25 miles one day and then not exercising for the rest of the month. The trick is to stay disciplined and execute a consistent exercise program over time.
This same principle holds for people trying to improve their financial health. When you ask someone why they don’t save more for retirement, a common reply is “I just don’t have any additional money to save.” While this may be the case for some people, for most of us the truth is that we just aren’t able to stay disciplined enough to save. If you look at your daily spending, it is likely that you will find a number of things that you really didn’t need to spend money on. If someone reduced their daily spending by only $5 a day, they would be able to save an additional $1,825 per year. It is unlikely that giving up $5 of spending per day would make anyone feel deprived. However, if you continued to save at that rate, in 10 years you would have saved an extra $24,054. In 20 years, you would have an additional $67,133 and in 30 years you end up with an extra $144,281! (Assuming a 6% compound return)
When it comes to saving for retirement, staying disciplined in all of our “little” daily spending decisions truly makes all of the difference.
Figures quoted are for illustrative purposes only and are not necessarily indicative of past or future results of any specific investment. They may or may not include consideration of the time value of money, inflation, fluctuation in principal, or, in many instances, taxes.