“I work hard to make
this money, so I’m going to enjoy it!”
It’s true, you probably worked hard to earn your money. But think about all the hours you had to put
in to earn your salary…then think about how quickly money can fly out your
hands. It only takes minutes to swipe
your debit card and lose $50 on a “quick run” to Target, or to hit the checkout
button at Amazon and purchase the assortment of items that you’ve had patiently
waiting in the shopping cart. Spending money is easy-it’s quick, there are
so many ways to spend it, and lots of people who get paid to entice you to
spend. Because spending is so easy to
do, it is easy to get yourself in trouble by overspending, sinking into debt,
and racking up credit card interest charges or bank overdraft fees. Also, maintaining the habit of spending all your money is
risky; in the event of an emergency—such as illness, job loss, or needing
household repairs—you will not have the money to cover these unexpected
expenses, which would then lead you into debt.
“I’ll worry about
tomorrow when it gets here!”
If retirement is over
20 years away, it may not be one of the things at the forefront of your mind,
but ignoring it can have dire consequences.
You don’t want to work until you are 70 years old because that’s the
only way you will have enough money to survive.
There may come a time when you are no longer able to work to support
yourself; the decisions you make today can affect your financial security and the
quality of your life during that time. In
addition to planning for retirement and funding a retirement plan, it’s
important to consider what the future economy will look like. Consider inflation, which means that the
dollar you have to day will have less purchasing power in the future. Skimping on your retirement contributions or underestimating
how much is needed in the future will leave you with an unpleasant surprise
when retirement age arrives. Lastly,
procrastinating when it comes to retirement contributions—or even procrastinating
about adding to your savings account—means you miss out on the benefit of time.
The earlier the save, the more time
you have to make your money grow. "Someone who puts $4,000 a year into retirement accounts starting at 22 can have $1 million by age 62, assuming 8% average annual returns. Wait 10 years to start contributing, and you'd have to put in more than twice as much -- $8,800 a year -- to reach the same goal."
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“I can afford that,
it’s ONLY $x (or $x per month)!”
A low purchase price may make you feel better about spending
your money, but make no mistake-there are more factors to consider when making
a purchase. A low price means very
little if the item you get is of poor quality and will need to be repaired or
replaced in the near future. Also, the
purchase price is hardly ever the “real” price of an object. Whether it is tailor fees for a jacket,
replacement ink cartridges for a new printer, or a data package for a new cell
phone, most purchase require additional service charges. Ignoring these additional costs can result in
a seemingly minute cash expenditure that creates a big dent in your budget in
the future. Likewise, signing up for
monthly subscriptions like gym memberships or cable services can negatively affects
your budget as you are increasing your
fixed monthly expenses, leave you more cash strapped each month. You
are agreeing to regularly pay a guaranteed debt, while your future income may
not be guaranteed. The future is
unknown, and in the face of an emergency, you may find yourself unable to meet
these financial obligations. There may
be fees for late or missed payments, and even penalties for cancelling these
services, so it is in your best interest to think long and hard before entering
into one of these agreements.
