Have you gone to work antsy because you haven’t exercised in a while? Perhaps you planned to visit the gym before work, but time got away from you. Then at work, there’s 10% of your brain that’s thinking “I need to go to the gym”. You don’t concentrate, and you don’t maximize your day. The thought of needing to exercise ruins your productivity and the joy you could have at work. It’s a sense of distraction and a sense that you aren’t accomplishing what you know you could accomplish.
I bring up this feeling because it’s what many people in their 20s and 30s feel when it comes to saving/investing for retirement. I think most people in their 20s and 30s know that early investing is the most important thing they can do for their retirement funds. But when they don’t save intentionally, spending money creates a twinge of guilt that reverberates. “I need to save,” they think, “Why did I buy this?” This feeling takes away from the joy of living in the moment and enjoying what you just bought. It’s not just important to save early for investment reasons, but for the stability it brings to our psychological lives as well.
To be clear, this blog post isn’t about the math of saving/investing early (but you should) nor is it about the amount saved (but 10%-25% of income is a good ballpark to be in). It’s about the importance of CONSISTENT saving for the purpose of investing for retirement. There are 6 reasons why consistent investing is just as important (if not more important) than the actual amount saved. Only one reason is mathematical. The rest are psychological.
Reason #1: You buy through the market highs and the market lows. Investing is particularly profitable when you buy products “on sale”. As the stock market fluctuates up and down, consistent investors purchase some shares at reduced prices (the market lows). Now you also purchase at market highs as well. The result is you effectively buy the market at an “average price” during your career. This is called dollar cost averaging.
Most people invest in “good times” (when the stock market is high) and don’t invest in “bad times” (when the stock market is low). So they buy at the high price but miss out on the low price. This is the least profitable way to invest. So be a consistent investor and don’t stop!
Reason #2: You gain stability in your life. When you make a commitment to save consistently (let’s say 15% of income) from now until retirement, you make a promise. You commit to a behavior. This is counter-cultural because many of us fear commitment. We need people who will “plant their flag” so to speak. When you say, “I am here and I will do this,” you and surrounding people benefit. They know where you stand. Furthermore, you know how much you have to spend. This ultimately creates stability in your life.
Reason #3: You control your money. When you stabilize your life by saving, you gain control. With control comes a sense of empowerment.
Reason #4: You say, “You matter”. When you save for future retirement, you honor your future self. You say, “future self, you matter. I will put this money away so that you will benefit.”
Reason #5: You are working the “consistency muscles”. I love when people say, “I want to save for my family.” But I also have to probe a little deeper into that desire. They say they want to save, but they don’t reduce their spending to make it work. Or they reduce their day-to-day spending, but the moment they want the next “big shiny thing”, they spend money they hadn’t budgeted on this big purchase they “must have”. There’s a start/stop mentality here. They want this, then they don’t want this. But then they want something else. When you save consistently, you start to say “no” to this start/stop mentality. You develop those consistency muscles, which is important because being consistent and reliable is one of the most important characteristics one can develop.
Reason #6: Others begin to rely on you. This can take a long time, but when you have money saved, you will notice how people begin to rely on you. They begin to need you even if they don’t realize it. You start giving off this subtle aura that you are dependable and that people can trust you. They can rely on you. This is good for you, your family, your community, and, further, your work. You start to change your psychology, and that makes you more successful.
I’d like to end by saying that there’s no shortage of stories detailing rich people taking advantage of others. But money didn’t turn them into that. That’s just who they were. Money and wealth are just what they used to take advantage of people. Money isn’t inherently evil. Don’t believe that lie. If you do, it will damage you, and it will keep you from being successful. The LOVE of money is the root of evil. I don’t want you to love money, but recognize it as a tool. It’s good to be successful. I want you to be successful. I want you to save consistently, and reap the rewards of compounding interest over a long and CONSISTENT investing timeframe.
If you have questions about maintaining consistent investing, reach out to us at 571-969-1459 or email us at ryan@ifpinvest.com.
