This blog post is targeted to individuals and families whose household income is adequate to pay for the basics of life that include housing, food, water, health care and transportation.
We have talked a lot about the importance of saving (accumulating) money on this blog. Today, let’s delve into the psychological barriers that prevent us from getting started and block our way to saving successfully.
Having spent 32 years in the financial services industry, one of the lessons learned was that saving is relatively easy for some people and terribly difficult for others … including those earning hundreds of thousands of dollars a year. Experienced taught me there are two psychological types of people — in regards to saving money — that determines whether saving money will be somewhat easy or a life-long challenge.
Those who are motivated by goals and those who easily develop new habits find that starting a saving plan and staying with it fairly easy. If someone has both traits, they are ready to start today and are already developing saving strategies in their head.
Those who are not motivated by goals and have difficulty establishing new habits have a very difficult time with saving money longer than a short period of time. These people must find within themselves a motivating force that will keep them committed to a life-long savings mindset and strategy.
Psychological Barriers to Saving Money
The need for immediate satisfaction
This need originates in the emotional parts of our brains, and can overwhelm the logical side that’s trying to point out we probably don’t need that new pair of shoes or a delicious (but pricey) dinner out right now. That’s why some people are more likely to use extra money to indulge in a shopping binge than to tuck it away in a retirement plan.
The “it won’t happen to me” belief
We hear of bad things happening all the time to others but believe that we have the ability to navigate our way out of financial trouble. In short, we all think we are above average, that it won’t happen to us.
Overcoming this belief is hard. Optimism is what gets most people out of bed in the morning, and while it doesn’t make sense to adopt a pessimistic attitude, it helps to be aware of this bias and not become a victim to it.
This is also known as “keeping up with the Joneses.” Not only does psychological pressure this come from friends and family, social media is an additional and influential source. If that person has a new car, why can’t I have one? Why am I not worthy?
We need to remind ourselves that having money and earning interest on it is much better that having a loan and paying interest. To top it off, my car is running just fine and that repairs I may need will be far less than the monthly car payments over five, six or seven years.
Fear of our own morbidity and mortality
Even if we can’t predict what will happen to us, one thing (along with taxes) is certain at some point in our life: illness and death. Some people really cannot see themselves being seriously ill or dead. But because we don’t like to think about our own morbidity and mortality, many people skip the important financial tasks of saving money for an extended illness or for the money needed for a secure and abundant lifestyle in our retirement years.
Not knowing how to get started
When it gets right down to it, it’s simply a matter of doing it. Take a portion of the money you usually spend and save it instead. There are hundreds of ways to start saving money and they are extensively presented on Internet websites and blogs, books, videos and podcasts. For beginning savers, keep in mind that saving a little bit often adds up to a lot and that saving must become a habit.
The purpose of this blog post is simply to present some psychological barriers we need to overcome so we can become successful savers.
What money saving barriers have you faced? How did you get past them?