What if you didn’t start saving early? Advice for late bloomers

“Saving is the key to wealth,” I wrote last week while trumpeting the extraordinary power of compound interest. “If you do not spend less than you earn, and if you do not save the difference, you cannot build the wealth you desire.” The younger you are when you begin saving, the more time compounding has to work in your favor, and the wealthier you can become. “The next best thing to starting early,” I wrote, “is starting now.”

Other Options

A few readers noted that while the mathematics of compounding make sense, it’s not motivational for those too old to take advantage of its full force. “This is pretty depressing for those of us who spent our 20s with practically no income thanks to universities,” wrote one commenter. Her sentiments were echoed by several others.

It’s important to note that saving is not the only smart thing you can do with your money. Your education is an investment, too. Yes, you should begin to save as soon as possible, but there are other good options, too.

My friend Joel is in medical school. I haven’t talked to him about his personal finances, but I doubt he has much saved right now. He lives a frugal lifestyle, but that’s out of necessity. He doesn’t have an income that allows him to splurge or to save. But Joel is obtaining an education that will pay dividends in the future. He’ll leave school with huge debt, but he’ll also have tremendous earning power. And he loves his work.

There are times when it makes sense not to save. Save when you can, but don’t sacrifice your happiness or your future to fully fund your Roth IRA.

Past, Present, Future

What if you didn’t start saving when you were young? What if you could have saved, but opted not to? What if, like me, you find yourself approaching 40 with the bare minimum of retirement savings. What should you do?

First, don’t beat yourself up over the past. There’s no sense fretting over choices you made when you didn’t know better. Do I wish that I’d saved for retirement instead of buying comic books and computer games? Absolutely. But what’s done is done.

Instead, structure your present so that it matches your priorities. If you’ve decided that saving is important, that you want to put your money to work in the stock market, then make moves in that direction. Open a Roth IRA. Set aside $50 or $100 or $200 a month.

If you look at your current situation and still don’t think you can save for retirement, that’s fine. Sometimes other things take priority. When you’re choosing between funding a Roth IRA and attending university, both are excellent options. (I would prefer the education.) But when you’re choosing between a Roth IRA and a new car, I believe saving for retirement is almost always the right choice. Be conscious of the trade-offs you’re making. You can’t have everything.

Finally, set goals for the future. The road to wealth is paved with goals — they are the fundamental building blocks of success. When you know what it is you’re trying to achieve, you can steer your life (and your finances) in that direction.

For example, I want to write from home. I’ve spent the past year arranging my life to make this possible. My future financial plans also reflect this. (That’s one reason we’re accelerating our mortgage payments; if I wasn’t self-employed and working from home, this might not be a priority.)

Happiness is More Than Money

If you didn’t start saving when you were young, don’t panic. Examine your priorities. Set goals. Structure your finances to reflect what it is you hope to get out of life. Saving is important — and you should begin as soon as possible — but it’s not the only component of personal finance.

Last year, Scott Adams (of Dilbert fame) wrote about his Happiness Formula:

Happiness = Health + Money + Social Life + Meaning

Whenever I feel bad about my financial situation, I remind myself that money isn’t everything. It’s only one part of the Big Picture. I’m actively working to improve my relationship with money, and that’s what matters.

There is no one right answer. Do what works for you.

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