Many humans are wired with a next for instant gratification. They would rather have $20 today instead of $40 in three months. The reward now stimulates the brain differently than the anticipation of a larger amount later, and that stimulation creates positive feelings. Who doesn’t like to feel good right now instead of tomorrow, next week, or next year? This makes saving and investing harder than it logically should be. Emotion often overrules logic and we make poor decisions.
This can make it difficult for many people to begin saving for the future instead of just planning to save in the future. If you are working up to saving a larger amount, planning ahead can help you budget for it appropriately. For example, if you plan to have your next pay raise added to you retirement contribution, it can help to set the date on your calendar, and then tell a few friends to help you stay accountable when the time comes.
If you change jobs, it is tempting to take your 401(k) as a lump sum payment, but rolling it over to a new plan will be more beneficial in the long run. Like increasing your savings, tell someone you will not take the payout. Being accountable, even to a friend, who actually has no say, can be all the edge you need to overrule your emotional side and make the logical choice.
Some people count on the elusive windfall – an inheritance, a winning lottery ticket – and therefore, only worry about today. This is usually an unlikely scenario that will only bring difficulties on the people involved. Statistically, people who do not have good financial habits, even if the windfall does happen to come, end up broken again in a relatively short period of time because of their emotional response.