It doesn’t take a genius to realize that if you spend every dollar you earn, you’ll never build up savings. Everyone knows that if you want to buy a car or house, or ever be able to retire, you need to save money. So why do so many people fall so far short of their goals?
It Takes a Long Time To Save That Much
Saving up a down payment for a house requires a lot of dedication for an extended period of time. When you first decide to start saving, you’re motivated and excited at the prospect of owning a house. But two years later when you only have $10,000 saved and you need $50,000 for a down payment, your motivation may start to wane. Skipping restaurant meals and shopping trips wasn’t so difficult when you were gung-ho about your goal, but after months and months of sacrifice, you may begin to feel like you’re never going to make it to the goal, so why bother trying? May as well enjoy your life now and worry about the future tomorrow, right?
They Think Only About Cash Flow
When it comes to car buying, the first question most people ask is, “what’s the monthly payment?” This is the wrong question to ask. Dealers are more than willing to accept a tiny down payment and stretch out a payment plan for 6 years or more to reduce the monthly payments. Paying $400/month for your car may not sound like such a bad deal right now, but what happens if you lose your job two years from now and can’t make the payments any more? Are you really willing to bet on your job security for the next 6+ years just so you can have a shiny new car? On top of that, though your monthly payment may seem manageable, over the course of 6 years, you’ll be paying thousands of dollars in interest, which is just plain silly.
Retirement is So Very, Very Far Away
Even home ownership is a short term goal compared to retirement. Many people in their 20′s fool themselves into thinking that they have so much time until retirement that they don’t have to worry about it yet. Also, while you’re early in your career, you’re rapidly learning new skills, focusing on career advancement, exploring new possibilities, and are generally excited about work. The prospect of working into your 80′s doesn’t sound so bad — after all, your job is great! So why bother putting money into your 401(k) when you’re going to keep working forever?
Expensive Things Must Be Better
For many people, they just have an impossibly hard time accepting that pricing is not always based on value. “This shirt costs $50, so it must be higher quality than that one which only costs $20.” “I need granite counter tops because everything else is such poor quality.” “This apartment is too cheap, there must be a catch!” (Ok, there probably is a catch, but it may be something you’re perfectly happy living with, so don’t write it off until you dig deeper.)