I've often wondered the why behind people's financial decisions. Behavioral finance is a growing field and a great marriage for someone like myself; my Bachelor's degree is in Psychology, but I have a career in finance. The intention of this post isn't to cast judgement, but rather to entertain the question of why people justify paying more for certain expenses than they save for their future, cable or satellite television being a great example.
Cable rates vary across the country, but in general, basic service costs around $50 a month excluding fees and taxes. Most people I know, if surveyed, would answer that they spend in excess of $100 per month (we were part of this group a couple years back). If you add this to cell phone and Internet bills, there are a lot of technology related expenses that didn't exist 25 years ago. Typically these won't be phased out or decrease as we age; my inkling is that they are only going to become more "necessary" and expensive as time goes on.
According to this article from Dave Ramsey's website, "the majority of American workers, 69 percent, have less than $50,000 saved for retirement -- 36 percent have less than $1,000." In that 36 percent, there are likely many that have nothing. There are reasons for this of course -- some good, some not so good and others not by choice. As a whole, it's my belief that our country isn't on track for retirement. Why?
Entertainment fills a "need" TODAY, whereas retirement is eons away. Pensions and social security used to take care of people handsomely, but due to companies not being able to keep up with previous entitlements (much like our social security system), they are the "old" way of obtaining your retirement paycheck. Neither of these methods are going to be around to the same extent (if at all) for Gen Y/Millennials, which means that we really need to take the reigns for our own financial future.
Like everything else, it's all about balance and prioritization. We've all heard the benefits of starting to save early; it doesn't matter your age, you should be thinking about today's decisions and their impact on your future. I don't have any new advice for you, but here are a couple of questions you may decide to ask yourself in relation to this topic:
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