If you're just out of school and in your first job, or single and in your 20's, you're probably not thinking about faraway, expensive plans which could be decades down the road.
Unfortunately, not thinking about those future opportunities might make them more expensive and difficult to attain in the future. By beginning to save now, you'll have more available to buy that house, that boat, or that car in the future. You'll have a good nest egg set aside for retiring early or a college education when it is time.
But it's important to start when you're young, when there is a long timeline to your target. Compounding returns over the years will allow your money to grow for you over the years. By starting early, you will require less principal payments in order to reach the amount needed to pay for that goal. It's a lot easier to build $20,000 over five to ten years and let interest fill part of that goal than it is to find such an amount in a few months.
The easiest way to set aside money is to pretend that money does not exist. While it may be difficult to do at a time when your wallet is stretched and every penny matters, it will be worth the short-term pain to enjoy the long-term benefit. Find a way to set aside a certain amount of money each month in a way that you cannot be tempted to draw upon it.
There are many types of savings vehicles you can use to "force" yourself to save. Some institutions offer savings accounts that restrict the number of withdrawals that can be made. There are retirement accounts that will penalize you for dipping into this forced savings, such as 401(k) plans and Roth IRA's. Roth IRA's are retirement accounts which mandate that funds be held for a minimum five-year period before being withdrawn - so they can be a savings vehicle that will let you save, but plan for more intermediate goals than retirement.
In addition, forcing yourself to save for the future and make do with less may force you to make tough choices about paying off debt and accruing other expenses. If going without fast food twice a week will help you get a car without needing financing in five years, then it would certainly be worthwhile to make the sacrifice now to get what you really want in the future. If one less night out at clubs or bars per week helps you put aside enough for a down payment on a house, then by all means do so. It will be worth it in the long run. If sacrificing a bit of your paycheck now to sock into a 401(k) or retirement plan to get a company match means you can retire in your 50's instead of your 60's, then set it up and take comfort; you are already planning for the future.
Michael Francis - I have a Master's Degree from Georgia State University. I have been writing professionally since 2008.
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