Oct 13, 2023  | Tags: psychology, saving strategy, Retirement

Our insights

Saving money requires discipline and a calculated, almost clinical understanding of the value of building your wealth by investing.

Saving and investing for retirement? Now that demands a whole new kind of ice in your veins – the realisation that you’re playing a long game as well as a fierce determination and well-planned strategy as to how to get there.

Achieving that goal is so challenging because we are constantly bombarded with messages, products and opportunities to spend rather than save.

The banks even allow us to buy now and pay later thanks to a torrent of financial institutions like Afterpay.

In a world where instant gratification is everywhere you look, it takes a strong-willed person to keep their credit card at bay and resolve to invest in their future.

Saving is crucial and despite employer contributions, many Australians will fall short of the desired amount of money they need in their superannuation for their retirement.

The Association of Superannuation Funds of Australia (ASFA) suggests that amount is $690,000 for a couple and $595,000 for a single.

But recent and future inflation along with everyone’s different ideas as to what makes a “comfortable” retirement means those figures will vary for everyone and constantly need reassessment.

To be better at saving for retirement, we need to be aware of the psychological barriers we all face that deter us from that goal and implement strategies to help us best negate them.

Here’s some food for thought as you try to reprogram your mind to help you carve a better financial future.

These are the mental obstacles that prevent people from putting away the extra money they need for a happy and prosperous retirement.

Present bias

Benjamin Franklin said, “Don’t put off until tomorrow what you can do today.”

He wasn’t talking about spending!

That is something you absolutely should put off for as long as you possibly can.

The temptation for instant gratification at the expense of long-term savings and investment can be overpowering.

It requires a capacity to understand the importance of future financial security and the need to set clear retirement goals to make savings more rewarding.

Overconfidence

Many people think they can catch up on saving for retirement somewhere down the track.

The problem with that is the enormous money they forfeit through the power of compound interest and growth in investments by not saving now.

Others bank on windfalls or inheritances to get them out of trouble which is clearly a risky strategy, leaving your future up to fate.

Procrastination

Many people delay starting or even thinking about saving for their retirement, adopting an “I’ll do it tomorrow” attitude.

The solution is to establish a savings plan with regular automated contributions.

And while it shouldn’t necessarily be “set and forget”, it’s a great way to jump the hurdle of doing nothing.

Inertia

While you need not check your savings or superannuation accounts daily, you do need to review them periodically.

Economic times along with your own personal circumstances can change and that may call for a shift of tack.

Lifestyle Inflation

It’s a classic trap so many people fall into.

As their income increases, so too does their spending – nearly always with no thought whatsoever to increasing their savings.

If you get that Christmas bonus or raise you were after, consider diverting some or all of it into your savings or super.

Social comparison

In life, there will always be someone bigger, smarter and stronger than you.

And there will always be someone wealthier.

Don’t fall for the trap of comparing your bank account or nest egg with those of your friends.

It can only lead to negative feelings about your ability to save enough for your future.

Concentrate on your own personal savings plan and goals and stick with them.

Loss aversion

Most people are more averse to giving up money they have rather than trying to make more for their retirement.

Instead of viewing that $50 per week being funnelled into your savings plan as a “loss”, try to see it as paying for a carefree retirement.

Try to visualise the day you walk away from the office and really start to enjoy the fruits of all those years of hard work.

Ignorance

Many people don’t understand financial basics and how to save effectively.

If you fall into that category, make an effort to address the issue by educating yourself and getting professional advice.

Read up on finance and investing from quality, independent sources, and empower yourself.

Talk to and work with a financial adviser who can help you make better decisions with your money for your long-term benefit.

Cognitive biases

Biases or pre-determined positions on anything can inhibit our ability to appreciate and capitalise on alternate or changing views and circumstances.

Instead of seeking information that supports your own views (confirmation biases), open yourself up to entertaining different sources and alternative opinions.

It’s good advice for anything but especially poignant in economics which can turn on a dime.

Fear and anxiety

The process of saving enough money for retirement can be intimidating, especially for those who are already under financial pressure.

The response of most of those people is to ignore it but the problem doesn’t go away.

The solution is to develop a carefully curated retirement plan factoring in all the risks and unknowns.

Working with an experienced financial adviser can take the anxiety out of it all and bring a real level of calm back to the table.

Get advice today

The best time to start planning for retirement is ... yesterday.

But today is better than tomorrow.

The reality is, even putting away a small amount of money regularly will have a massive impact on your future wealth.

Developing a plan for saving and investing for your retirement can seem like a mountain to climb.

But it doesn’t have to be.

That’s where Calder Wealth Management can help.

CWM are financial experts who can act as your financial mentor, helping you start your savings plan from scratch.

We can also run a critical eye over what you already have in place.

We’ll work with you to devise and implement investment strategies whatever your financial goals.

No-one should do without quality financial advice from someone personally invested in their wealth accumulation.

At CWM we pride ourselves on leading our clients into the future with structure, financial stability and confidence. 

Contact us today to discuss all of your financial needs and concerns.

Written by Jodie Schroeder.

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.