“Yes, I am going to get started saving and investing. Yes, I know it is important for my future and my family’s. I’m going to get started soon. Maybe next year.”

Just the other day I heard this from a friend who keeps meaning to set up an Individual Retirement Account (IRA) but never does.

Nothing Changes

Often, I hear this same sentiment from friends and acquaintances. He or she is someone who never seems to get serious about taking the critical steps toward financial independence. In the case of my friend, who is a wonderful hard-working man, it has now been about two years since we discussed getting started but so far no progress.

The lack of savings and investments will hurt this person in many ways over the course of a lifetime. The problem will worsen year by year as his number of prime earning years declines.

Why does this happen to many people?

Blame It on Being a Human

There are many reasons. Human nature is one. It is human nature for most of us not to change or to change reluctantly. We can easily get stuck in our ways. We’re all that way in some aspects of our lives.

Inertia is the natural state of almost everyone. Inertia is fine if you have automatic savings and investing systems set up. But if you have never had the regular saving habit it is often difficult to overcome inertia, which is true in many parts of our lives.

“Just One More Show…”

Have you ever sat down to watch one hour long show on the tube, then, when it was over, stayed in your comfortable position on the couch and watched hours more on the idiot box? That’s even though most of it was drivel and, by the end of the evening, you were angry with yourself; not for watching something you wanted to watch but for allowing yourself to waste your time on other things that you knew would be useless, but were too lazy to turn off.

So, given that time seems to fly, especially as we move toward the middle of our lives and the sands in the hourglass are fewer, it is easy for so many people to reach their 50s or even 60s and have nothing or very little saved for retirement or anything else. They keep delaying things, which will only make the task harder.

“You’re Cleaning Is Way Overdue”

For instance, go to the dentist today for a routine cleaning or to get rid of a few cavities and it is no big problem. Wait for some years and you might then need root canal or, worse, lose all your teeth.

It is no different in preparing to invest for retirement or any other long-term goal: Time’s a wasting so the sooner the better. Start today and it a routine cleaning. Wait for years and you’ll need false teeth. Not saving today can lead to disaster later on.

I know some of these people who have the manana philosophy. Many of them, who made good money for a good part of their lives, end up asking sadly: “How did this happen to me? I want to take it easy or possibly devote myself to my hobbies for the rest of my life but I can’t afford to do it. I am stuck riding the wretched E-train every morning and I hate it. I am working in a job I no longer like for the rest of my life.”

Yet disaster isn’t inevitable. Indeed, use the same inertia that sucks you into wasting resources on useless things into saving and investing on a regular basis. The key, at a certain point, is not to think and delay; it is to simply act: It is to set up automatic savings and investing programs, then sit back.

Pay the Rent, but also Pay the Fund Company

These are programs that kick in each month and require you to be about as active as when you are gawking at the idiot box. Many people already adopt this principle to pay bills. They have automatic deductions from their checking accounts to pay bills such as for rent or for cable television. The latter, to borrow a term from the masterful novel “Brave New World,” is the soma of our times. It often puts our minds to sleep.

The trick of overcoming this kind of inertia is to adopt the same idea in paying for savings and investments. Have money taken out of your checking account each month that will go into a savings account or mutual fund account. As to the latter, I recommend a cheap as you know what index fund with a company like Vanguard.

The money you put in doesn’t have to be a lot. In fact, at the beginning it can be small amount if you are ready to invest over 30 years or more.

Take the Money and Run

By the way, this idea also goes for company savings plans where the employer or the government will match contributions or provide tax breaks. Take every last cent you can get because you don’t know when matching will stop. I once worked for a small publishing company that, for my first ten years there, provided a big 401(k) match. Unfortunately, during my last five years, the company went through hard times and stopped matching. At least I had gotten ten years of matches since I knew fellow workers who never contributed a cent to the plan.

So start now with small amounts of regular investments. As you make more money, increase the amount you put in each month. The reason I emphasize getting as many years of investing as possible is because the longer the compounding effect takes place, the more likely one is to achieve his or her goals. I want to examine two scenarios to illustrate the point.

Let’s say you only invest $200 a month, earn nine percent a year, but you do it over 40 years and ultimately invest $96,000. By age 65 this person has $943,286.

By contrast, another person invests a lot more a month, $727, earning the same nine percent a year. But this person only does invest for 20 years. He invests some $175,000. The person who only invested for 20 years, actually invests a lot more, about $80,000 more, but over a shorter period. That means less compounding.

How much does he have after 20 years? Only some $336,448. That is almost $600,000 less than the guy who invested smaller amounts but over longer periods.

Compounding made, and will always make, a big difference over the long term. The guy who didn’t put things off ends with some $943,000. The person who says “I’ll get around to it one of these days” and waited 20 years is left with some $600,000 less.

Do you think that $600,000 will make a big difference in your life?

That was a rhetorical question.

Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post. The eBook version of his latest book "MoneySense" is available now for Free Download by clicking HERE

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