Now I know this sounds crazy but bear with me while I explain.
This theory is not entirely my own and so I must give credit to Mike Michalowicz who first introduced me to the idea in his book titled Profit First (a must-read if you are a business owner). In his book, Mike highlights our habit of using less and less toothpaste as our tube gets emptier and emptier. The idea, Mike explains, is that it is human nature to conserve resources as they become scarce and to use them more liberally when they are in abundance. The concept is the EXACT SAME when applied to money.
Anyone who has attended college or university, has travelled on a budget or has found themselves in between jobs can attest to the fact that dollars can always be stretched further if there is no other option. Similarly, we all know somebody who will stop at nothing to squeeze that laaast little bit of toothpaste out of the tube. When building your retirement plan, you should use this theory to your advantage. By setting up automatic contributions, you can reduce the amount of toothpaste in your tube (by transferring the money to your savings account on payday) and force yourself to only spend on necessities.
This small forced habit will undoubtedly save you money and should help fast track your financial goals.
Comments