Back in the 1930’s researchers found that when lab rats got closer to the end of their task and could see the prize they would speed up in their approach to the finish and their reward. As the reward of the goal was closer, more priority was placed on getting to the reward. This same function exists in all of God’s creation. We put priority on things close at hand and tend to discount things that are further away. When it come to our finances we see this come through loud and clear.
We struggle with budgets and plans because immediate needs and wants take precedence over the very reasonable plans we have set. This is proven by the failure of so many New Year’s Resolutions we set each year. The problem is that we all know what we should do. Eat healthy food options, exercise, save for the future, etc., but when it comes to the moment of decision we are likely to choose the sweets or sit on the couch, and spend the money. Why? Because we don’t set practical goals. When diet and exercise are involved we only set our ideal goal but don’t break down that ideal goal into the smaller chunks that we can use as road markers on our progress. The same goes for our retirement savings or really any type of savings, i.e. emergency fund, college, house, car. Take retirement; for most of us to maintain our current lifestyle in our retirement years we will probably need somewhere in the neighborhood of $750,000 to $1 million dollars by the time we retire. Those goals seem very far off when you are in your 20’s and 30’s. A $1 million dollar goal seems too much for a $3 cup of coffee to derail our savings plan, but we haven’t set our guide post properly to reach our goals easily.
Let’s break this goal down further to show the effect of the coffee. Say you are 30 years old. You need to have $1 million by the time you reach retirement at age 67 (full benefits for Social Security). If we want to see a present savings goal then we don’t set a per year savings goal of $4,560, or even a monthly goal of $380 per month, even a weekly goal can be too much for some people, $87.69. So, let’s drop it down to a daily goal of $12.52. By saving $12.52 per day over the next 37 years, you will reach retirement with $1,000,080.71 in your retirement account, based on an average 8% earnings. By the time you reach retirement you will have contributed $168,720 and the rest will be investment growth. You have no need to increase or speed up your contribution level as you get closer to the reward of your hard work.