The human brain is wired to the immediate gratification of desires and comfort. The human conscience, on the other hand, is wired towards self-control. This difference in the wiring between the two often leads to eternal conflict. The financial problem rears its ugly head when we want to live like a king at the moment while our conscience continuously warns us and goads us to save for the future.
Is it possible to live well as well as save for the future?
Yes. The good news is that it is possible to balance life enjoyment and save for the future. The most important part of the process is to tweak the order. Balancing these two needs means ensuring you are keeping your financial house in charge of prioritizing the two.
The secret is to save first and then enjoy the remaining part of your income.
The following rules are a sure-shot way of enjoying your life hassle-free while saving for retirement. The additional peace of mind these principles will give you is worth their weight in gold. This will also enable you to have a higher quality of life and improve your relationships as you will always know in the back of your mind that you are taking care of the present and future.
Put your savings and investment on auto-debit mode at the beginning of the month.
Your skills are an income-generating asset. However, you must be able to utilize your skill set by totally focusing on your work. Putting your savings and investment on auto-debit mode from your bank account will ensure that you do not have to think about and spend time on your investment plans.
Save every month
Savings is a long-term game. Once you save on a disciplined monthly plan, you can gain the benefit of compound interest.
What is so great about compound interest?
Compound interest is where your long-term investment earns interest multiple times, leading to very significant returns. For example, 100 dollars a month invested over 20 years at around four to six percent can get a person anywhere between 35,000 to 45,000 dollars. The amount invested for 30 years at about 4 and 6 percent interest can grow to anywhere between 67,000 and 95,000 dollars. Therefore, with the magic of compound interest, you can double your invested amount even with minimal interest rates.
Save 50 percent and enjoy 50 percent of your windfall gains.
Financial windfall refers to an unexpected extra income. It could be an incentive or bonus in work, a cost-saving, a discount, a tax refund, a cash gift, etc. We recommend you enjoy half the money and put the remaining amount into a long-term investment. You can also invest in long-term fixed assets like a piece of land. Fragments of land which are sold after years can give incredibly high returns.
Visualize what your savings can enable you to do in future
Set aside 5 minutes per day to how you can enjoy life with your savings after some time. You can also assure yourself that your benefit will be two-fold. Your saving habit over the years will allow you to have great self-control. Additionally, the compounding return on your savings will enable you to have a large corpus which, coupled with your financial discipline, will make you have more than enough money in your hands.