Perhaps the greatest challenge, overall, to achieving long-term financial goals is the inability…or, more precisely, the unwillingness…to apply a set sum of money each month toward achieving them. The importance of understanding basic psychology, and our simple failings as people, can go a long way to helping us to appreciate the importance of “systematizing” our efforts to achieve financial stability and independence.
One of the best mechanisms to which you can turn to help achieve your goals is the automatic debit from your bank account. When you initiate an automatic debit from your account and into a retirement plan, like an IRA, you are immediately turning a discretionary expense into a bona fide monthly obligation. The problem with any discretionary expenses, including those that are genuinely important, is that we simply do not look at them the same way as those expenses that are required. Now, you might be thinking, “I don’t pay my electric bill each month by debit, but yet I make sure to get that in just fine.” That may be true, but your electric bill is not a discretionary expense; if you don’t pay it, a service that is essential to your well-being will be eliminated. Therefore, the strategy here is to identify those discretionary expenses that you should be elevating to the same level of importance as the electric bill, and incorporate the mechanism of the monthly debit to achieving that. There are large numbers of people who would have never achieved any kind of reasonable net worth at a point in their lives when they need it the most had they not employed such a simple mechanism to either fund a retirement account or pay down a substantial debt; this is the “Part B” to the use of such a mechanism, the fact that you can employ it to pay down debt as much as to build savings. For example, using an auto-debit feature to make extra principal payments to your mortgage is another great way to put your wealth-building efforts on automatic pilot.
It is no secret that people are inclined to procrastination, to putting things off, and often do so to such a degree that many important tasks fail to ever get done. Working towards your long-term financial goals, and plugging away at the specific tasks in which you should engage as a part of the process, are, unfortunately, efforts that are all-too-frequently pushed off to the side. Make a resolution today that you will move them back to center-stage by accomplishing them with the assistance of the auto-debit feature…and start working your way, finally, toward the financial freedom about which you’ve always dreamed.
Robert G. Yetman, Jr.