I read the article “Why People Aren’t Motivated to Address Climate Change” the other day on some recent developments in climate change research and it got me thinking. I’m not sure how much you know about climate change but the world is facing a long term threat. The report essentially said that if we get our act together over the next 10 years we can severely mitigate the effects of climate change. What I realized is that this same mentality can be applied to retirement savings.
World leader’s reaction to such big news
As you can imagine all the world leaders got on the world’s biggest conference call (this took a while because technology never cooperates), hashed out their differences and put together a…..
this never actually happened. It turns out President Trump never said a word about the report and the presidential favorite in Brazil said he’s going to take his country out of the Paris agreement.
If the vast majority of the world’s scientists can point to calculations, statistics and figures and all come away with the same conclusion, why aren’t we doing anything about it?
This got me thinking and I realized people do this every day in other areas of their life, for instance, their health.
How we use this same mentality in our own lives
We’ve all seen it. Someone knows they have a weight problem or their knee hurts. A visit to the doctor would certainly be a small act they can do now to start preventing future issues, and these people never go.
Maybe you don’t go? I’m not here to judge (but you really should).
Before they know it this weight problem has had secondary effects and causing more issues. The knee that used to hurt a little now causes you to be in pain withe very step.
When they can’t take it then they go. If they waited too long some of the effects may be irreversible or they need a knee replacement now.
What about in personal finance? Uh think retirement savings.
Lets not forget about retirement savings either
Everyone knows someone who has this same mentality with their retirement savings. They constantly just have the approach of “I’ll take care of it in the future”.
People. Who hasn’t read one of the “Sally started investing when he was 25 and Harry started investing 10 years later. Now Harry has to invest so much more to play catch up” articles? Well if you haven’t, click here. Trust me.
The author of the original HBR article makes some great points as to why people do this. I think they all seem logical. However, one of these stood out to me more than the others.
The author said that to reverse climate change we’d have to trade short term benefits for long term benefits. I know what you’re thinking.
Lets party now and figure out the rest later.
That’s not a good idea. However, that’s what most people do. According to CNBC the mean retirement savings amounts for people knocking on retirements is less than 200k. I can’t imagine working my tail off for 40 years and then not being able to enjoy myself in retirement.
The marshmallow test and delayed gratification
This whole issue with humans not wanting to delay gratification has been around for a while. Are you familiar with the marshmallow test? Here are the bullet points:
- Researchers put a marshmallow in front of a kid (maybe 8-10 years old)
- Tell them that if they DON’T eat the marshmallow then they will get another one
- As expected some of the kids ate the marshmallow without even thinking about the others
If you want to watch some kids debate what to do check out this video. They did a follow up study on the kids who were in the original experiment in 1972. It turns out the ones who were able to delay gratification had highers SAT scores, lower rates of obesity, and better scores in several others measures of life. You can check out more here.
It all comes down to delayed gratification. The more and longer you can delay gratification, seems to point to a better overall life. I know what you’re thinking:
partying now sure sounds like a lot more fun.
Simple steps to take action now to build up your retirement savings
I get it. I do. Here is what I’d recommend.
Make retirement savings a short term issue. If you are wondering what I mean, follow these steps:
- Head over here to a great retirement calculator by ESI Money.
- Figure out an amount of money that you need to put away to hit your goals
- Put this in your budget
- Automate the savings so it happens automatically.
If you can budget and automate it for it life gets so much easier. This is exactly why being aware of your spending and automating your finances are two tenets of the eat.money lifestyle.
Its all about taking a long term problem that’s way out there and making it a short term one. Its so much better to start now, put in the work and reap the benefits in the future.