We all know we should save for the future, but getting in the mindset of doing it is the real trick. Finance blog Early Retirement Extreme offers a mental test for all spending decisions: will this press the accelerator towards your financial goals, or the brakes?
Picture: Sheridan Hetherington
It's one thing for us to view our financial decisions as a worthwhile indulgence. It's another to assume that since we've socked $20 away this month, all of our other purchases are valid because "Well, I saved!" To get a perspective on what's really getting in your way, Early Retirement Extreme offers a simple analogy:
A very simple way to think about personal finance, and this is really all you need to learn, is to think of yourself as driving a car towards a destination. Let's assume the car is an automatic. Then it will have an accelerator and a brake. For every action, you take, you have to stop and consider this: If I do this; if I engage in this activity am I pressing the accelerator or the brake?
...To get ahead, you must either press the accelerator harder or ease on the brake. Apparently lots of people are not fully aware of just how hard they're flooring the brake. Therefore try this exercise. Every time you touch something, ask yourself whether this item has accelerated your income or whether it has decreased your savings.
Of course, we all have to hit the brakes sometimes. However, if you can count $1000 worth of braking decisions every month versus $100 worth of acceleration, it may be time to re-evaluate your priorities.