Definition: Adjective; Resulting from or relating to an irresistible urge, esp. one that is against one's concious wishes: "compulsive saving."
One day, in the early afternoon you find yourself off of work on your way home. A quick stop at the grocery store, followed by a trip to the post office to check the P.O. box.
Today is a normal enough day.
As you pull into your driveway, your curiousity about a handwritten envolope sent from a law firm on the east coast gets the best of you and you tear it open. A letter from a trustee notifies you that your great uncle Edward passed away several weeks ago, and his trust had you listed as a beneficiary. Also enclosed in the envelope is a check for $50,000.
What Would You Do
Yes, you know this is a personal finance blog and I KNOW that YOU KNOW where this is going. But take a moment and think about what you would do with the money, and BE HONEST.
Maybe you have a desire for a new car, so you'd list your 5 year old perfectly fine vehicle for sale on craigslist and get your new 2014 Ford 150 this afternoon. Or maybe you've grown so tired of seeing "Sallie Mae Payment" as an auto deduction on your checking account that you flip open your laptop and pay the balance in full!
Whatever the case, I'd like you to scroll back up to the definition of compulsive.
Ok, welcome back. So let's take a look at this definition. An "irresistible urge" is something I feel most people experience from time to time. It could be sexual, or an addiction like cigarettes, or a desire to do a hobby you love like go surfing, or play video games. Whatever it is, you know the feeling.
Now I'd like you to close your eyes and visualize nothing but a black void. I know its hard to read with your eyes closed so you can open them now. But after you finish reading this article, try to visualize the feeling you would get the moment you found out about this $50,000 check. Of course it would be at least somewhat positive (even if a relative recently passed), but what is the VERY NEXT THING that pops into your head.
Payoff loans. New Car! Vacation! Save.
I'd like you to do whatever you need to do to shift your VERY NEXT THOUGHT to either paying off loans or saving.
Let's try again:
You recieve an email from your HR payroll department that the company's board of directors has approved a bonus equal to 5% of your salary to be deposited to your checking account!
(Remember what we practiced...ssSSaaVVe). YES, That's good.
I can assure you that you WILL succeed with your saving and investing goals if your mantra becomes:
Save when you can, buy when you must.
We all know how hard it is to save when times are tough. Single income earning families raising kids? That's tough! Car won't start? FORGET ABOUT IT!
When times are good is the absolute best time to save, but even if times aren't great the best time to save is NOW. You will NEVER be fully prepared to start saving, so make the CHOICE to do so now.
We've all heard about compulsive spending. Usually this involves an irresistible urge to buy, say new shoes even though you know it's best not to. But how about flipping that. How about compulsive saving every time you think you need something. What if your knee-jerk reaction in potential spending situations was to SAVE IT?!?
In the example above of the $50,000 check, I'd recommend folks having a seriously difficult time depositing the money into their 401k or IRA over time, or paying off loans to go ahead and enjoy 1-5% of it by purchasing something they desire NOW, but put the rest toward retirement savings, or paying down debt.
Can't may as well mean "won't."
Find a way to eliminate habitual purchases and put some money away NOW.
-Extra money accumulating in your checking account? Save.
-Sold some old gear at a garage sale? Save.
-Recieved a few birthday checks? Save.
Make this a COMPULSIVE habit and you WILL succeed.
What would your compulsive reaction be if you recieved a $50,000 check in the mail? Please share your comments with us!