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Fighting Your Brain to Save Money

It’s interesting to consider the reasons we don’t save. For each person those reasons can be different, but there is an awful lot of crossover on the issue as well. A lot of people know they should save, especially for things like retirement. Common knowledge also dictates that the sooner you start saving the better off you will be. However that’s not really how our mind seems to work. It’s hard to envision what your retirement will be like, especially at my age, where even an early retirement is about 20 years off. Your vision of the future isn’t clear, it’s blurry and uncertain, but that new X-box is clear as day, right in front of you.

It appears I’m not alone in this line of thinking either, as a recent article at Yahoo! Finance suggests. I won’t bore you with the details, but here’s what the whole premise boils down to:

New discoveries in neuroscience labs are helping to explain why it’s so hard to resist the allure of instant gratification. It turns out that your brain is much more aroused by $1 today than by $1 tomorrow. And $1 six months from now barely registers.

Who knew?

Anyone who gives the idea some thought will probably come to the conclusion that this makes sense. Let’s face it, a LOT of investing and saving is downright boring. You don’t get to use your money to go out and have fun and live it up, you have to stash it away in some dusty brokerage or savings account, hoping that it’ll ferment over the next few decades and when it’s done, you’ll be a millionaire (or multi-millionaire depending on inflation).

But in the end you can of course overcome. Many authors and bloggers suggest the automatic approach, but personally I think it’s more fun to keep an eye on my investments and watch them grow. Sure I can’t touch them today, tomorrow, or next year, but I still get that warm fuzzy feeling when I see the little green percentage numbers indicating my money is growing. Of course there’s always a slight sinking feeling when you see those numbers fall into the red as well (as the last few weeks clearly demonstrates), but you can’t panic, liquidate your 401k like so many do and go blow it on a new car, all the awhile getting slammed by Uncle Sam for an early withdrawal.

The real winners in finance are the savers. Those who can overcome the allure and hard-wired brain impulses to get that satisfaction now, right now. Your reward is down the line, in time, when you can retire in comfort and security. The best part is that the sooner you start, the sooner you’ll get there.

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