I came across an interesting article a few weeks ago that discussed reasons and excuses that teenagers or young adults use as to why they can't become millionaires. However, I believe that the excuses outlined in the article not only apply to kids or teenagers, but can be applied to pretty much everyone... young adults and older adults.
Below are five common excuses that we have all heard or said ourselves when it comes to the feasibility of saving a nice nest egg by retirement. Let's start off with the first excuse why you or your kids can't become millionaires:
1) I don't have any money
This seems to be a pretty common excuse used by many people. Everyone that receives a steady income has money to spend. New clothes, groceries, entertainment, etc..... this all requires money. Some individuals may have more money available than others, but it is important to remember that setting aside a percentage of one's income is more important than the actual dollar figure. A particular dollar amount may have different importance to different individuals, but the same percentage applied to different incomes has relatively the same importance. Spending less than you earn is a simple strategy that will ensure you will always have money to set aside for saving.
2) I want to spend and enjoy my money. I don’t want to tie that money up.
What else is money good for other than spending right? While it's true that you should enjoy your money to some degree, there's no reason to get careless and carried away. An individual shouldn't spend every waking moment of their life saving every penny, but be reasonable with how much is spent and live within your means. Spending habits are hard to break and such habits will carry into retirement when the income stream you've been used to during working life suddenly dries up.
3) I'm too young to think about investing
Investing at a young age is one of the most beneficial things to do for yourself to ensure a comfortable retirement. Compounding returns prove to be much more effective even over just a few extra years. The difference in investing at 25 compared to at 35 is phenomenal given the same return percentage. This effect is illustrated in Lesson 6: The Compounding Effect.
4) Retirement is so far away, I'll worry about that later
This ties nicely in with number 3. Again, the earlier one starts investing, the better. Planning to achieve a financial goal by retirement requires smaller regular contributions and smaller compounding returns the younger someone starts investing.
5) I already have an RRSP plan at work
Having a retirement plan through your employer should be an added bonus in addition to your regular intermittent savings contributions, but it shouldn't be the only savings that you depend on. Company RRSP plans are limited in a sense that they are typically not very diversified in terms of where the money is being invested (i.e. company stock) or what investment security is utilized (i.e. only stocks or only ETFs). RRSP contributions through an employer will only last for the employment duration. There is more certainty around doing regular periodic contributions yourself to your own RRSP outside of work instead of relying on automatic company RRSP allocations.
It's easy to see that the list of excuses can really apply to anyone, and not just to teenagers or young adults. As mentioned in Lesson 5, teaching teenagers, young and older adults, and even ourselves about money habits and perhaps introducing simple budgeting skills can help break through the barrier of excuses to one day becoming a millionaire retiree.