Tomorrow it won’t be too late, but it will be more difficult and less pleasant, even painful. This principle applies to many situations in life, but it is particularly suited to preparing for retirement. Even if, rationally, it seems obvious that we must tackle this task, why are so many people doing it? do they constantly push back, to the point of turning a blind eye to its importance?
Human beings are complex, and I like to say that we are guided more by emotion than by reason. This is both beautiful and dangerous, because it can lead us into certain pitfalls when it comes to personal finance. Without a plan or strategy, for example, it will always be more difficult to invest significantly for the long term. If your brain knows that money is available in your bank account, it will encourage you to spend it to achieve immediate happiness. You know, even financial planners have to learn to balance discipline and endorphins…
This is not the first time that I have written it here, inflation, contrary to what many have argued, will not be transitory. This is why I regularly come back to the same warning: if you have not already done so, you must quickly adjust your discretionary spending in order to maintain savings, avoid debt and thus maintain a situation healthy financial situation.
Where are we two years later? Household savings have melted, consumption is only just beginning to decline. This is concrete proof that it is always easier to postpone the problem. If it’s difficult to tackle budget reductions for items like leisure and travel—for the short term and even temporarily—now imagine the challenge of preparing for retirement.
What if retirement planning was scary?
Fear of change or fear of bad news?
To some extent, we are aware of the majority of our personal challenges. The fact that it is so painful to reduce our discretionary spending, knowing that inflation will have a direct impact on our essential spending, is explained by our nature. Humans are guided by pleasure, yes, but they are also influenced by the fear of change. The status quo is so much simpler.
This is a hypothesis that often comes up when I discuss with my team. Behind the lack of retirement planning, a very common problem, there is probably always a little fear. What if the answer my financial planner gives me is not the one I want to see or hear?
This is easily observed in the few minutes before financial planning results are presented. People are expressing very palpable concern. In all situations, from the most assertive candy pink to the palest pink, relief and calming will be observable in the following minutes.
If you should take away something from this column, it is the following reflection: any future situation visualized, regardless of whether the result is exciting or worrying, calms the mind and structures future actions towards an improvement of the situation when required. , or towards optimization, in easier cases.
Indeed, if there is a problem, postponing the task will not make it go away. On the contrary, waiting is more likely to amplify it.
Procrastination is expensive
If you need a portfolio of $1,500,000 to maintain your standard of living in retirement, the effort required to get there will not be at all the same, depending on your age. where you will set up your retirement plan. If you start, for example, at age 25, you could achieve this with an investment of $1,200 per month. If at 50 you have always put off this effort, you could need an amount five to six times greater to get there.
The opportunity cost of this massive catch-up only increases over the years. Paradoxically, if you postpone preparing for retirement so as not to deprive yourself of pleasures in the short term, it is inevitable that the deprivation will only be greater later. Let’s avoid the traps of thoughts like: “Life is so fragile, I have to enjoy it now and I will spend less later.” » Planning accompanied by an expert will allow you to find the balanced response to navigate between present and future times.
Tomorrow it won’t be too late, but it will be minus one. Confronting your fear or paralysis when it comes to preparing for retirement by taking action today, no matter how small, will already be a step in the right direction.