Tell me if any of these statements sound like things you’ve said or thoughts you’ve had recently:
- I’ll opt into the 401(k) after my next raise.
- I’ll start contributing to an IRA once I make more.
- Sure, I’ve got a little debt now, but eventually I’ll be making more money and can pay it off.
- It’s just one more student loan—and besides, it’s going to help me earn more money.
- I’ll start a savings account once I get my next bonus/raise.
If you’ve made these or similar statements, then you probably think you’re just betting on your future—but the problem is that you’re also actively working against your future by making these sorts of promises and ignoring all you could be doing today.
Compounding: Only Works if You Use It
When you save money for retirement, it compounds. This means that every dollar you save earns interest—which then earns even more interest. But that compounding only happens when you’re actually saving—so if you wait to save until you’re earning more, you’re going to miss out on decades of added compounding.
Loan and Credit Interest Depletes Your Income
Waiting to make efforts to aggressively pay down your debt actually means spending more to keep it. The longer you wait to pay it off, the more you spend on interest. Even paying an added $10 a month can significantly reduce the amount of interest you pay over time, so there’s no point in holding on to that debt.
Life Brings Us Few Guarantees
There is always a chance that the extra money you think is in your future actually isn’t. It’s possible you might get laid off before you get a raise or bonus. It’s possible your expected raise or bonus won’t be as much as you anticipated. There’s also a chance you won’t get that big promotion or that your company will need to make budget cuts during raise season.
It’s good to have future plans for your money, but it’s also good to have a plan to take care of debt repayment and savings now, because no one knows what the future holds and you can make great strides even if you just do a little today.