“I can only afford to save $50 a month, that won’t be enough to make a difference. Why bother?”
I can’t tell you how many times I’ve heard this or a variation of it. It comes up when discussing things like creating an emergency fund, saving for a down payment, investing for a child’s college education, and (the big one) retirement. No matter what the situation is, the mindset that your contribution toward it will be insignificant is wrong. Somehow this feeling has crept its way into people’s minds, and I believe a big reason for it is framing.
Framing relates to how we contextualize things in our life. We often make different decisions about the same thing when in a different mental state. A great post over on The Psy-Fi Blog shares an example of framing, explaining that:
“If you tell a nicotine fiend that if they smoke for the next forty years their chances of getting terminal lung cancer will increase from 1% to 1.3% they’re likely to carry on inhaling. If you frame the argument by telling them that they’ll increase their chances of dying by 30% they’re likely to choke on their next fix. Same argument, same numbers, different frame.”
We get caught up thinking of our contribution in terms of how much we’ll need to reach our target. That can become pretty daunting as we’re discussing some big ticket items and goals. Emergency funds, college educations, houses, and cars are expensive goals whose cost we can determine with a fair amount of accuracy. However, the amount needed for retirement is often an unknown (especially early on). It’s easy to allow these big numbers to disarm you. This is where the mindset of “why bother saving $50 today” comes from.
Think about the situation differently. That $50 is 100% of what you can afford to save right now. You should make that contribution and be proud of it. $50 saved today has a pretty solid chance of helping you in some future capacity. Plenty of people reach their goals by making small, repeated contributions toward them. An easy way to make sure you do this is by automating the process. Once you automate, compound interest can go to work for you. Anthony Isola detailed just how awesome compounding can be in this post.
You don’t have to be content with the amount you’re currently capable of saving, but don’t let your dissatisfaction paralyze you. Recognize that you would like to save more, and create a plan to do so. For the time being, contribute what you can and be proud of the steps you’ve taken, but realize that improvements need to be made. It’s possible to be proud without being content.
You cannot realistically expect to go from saving nothing to suddenly being able to save a sizable amount. That’s like thinking you can run a marathon without any training. You have to be capable of running a 5k first! Ben Carlson of A Wealth of Common Sense provided good guidance, writing:
“If you haven’t started saving yet or aren’t saving enough, set a reasonable monthly goal. Don’t try to do it all at once. You’ll never stick with it if you try to go from saving nothing at all to saving $500 a month.”
Small, regular contributions toward a goal will make a difference, even if it doesn’t feel that way at first.
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