From the course: Start Young for Your Best Retirement

It's not your money

From the course: Start Young for Your Best Retirement

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It's not your money

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- In my work as a financial adviser, I talk a lot about the future you. Almost everyone is saving for something, or has some sort of life goal that requires savings. So by looking at goals from the perspective of the person who has reached those goals, that is the future you, it makes budgeting, saving and investing much more understandable and actionable. If, for example, you picture yourself in a nice big house in five years, that visualization can go a long way towards helping you build a strategy that helps you save enough money for the deposit. Let's take a look at your retirement. If that retired you has completely stopped working, lives in a big house in an expensive city, takes lots of vacations and has no pension, then this future you is going to need a big pot of savings. And in order for you to bring your future you to reality, you need to start putting money away today. Now, that's obvious. But there's one important thing that you should understand that will help you get to your savings goal. It isn't your money. The money you put away for retirement is not for you, you can't use it, it belongs to the future you. This focus on the future isn't just a mental activity, it also has serious implications on how you treat your retirement savings. To help you get there, try focusing on these three simple rules. Don't touch that money. It's not yours, after all, it's for the future you. So make sure the money that you put away isn't something you'll need to use at some point before your retirement. Your future you will not be happy if you spend her money. Invest the money. Don't have it sitting in cash. Open a tax advantage retirement account and put your money to work, in at least a low cost index fund. Put your money to work so that there's more savings for future you to live on. And don't take too many risks with that money. Be cautious with money that isn't yours. Don't speculate or get into exotic investments, buy and hold for the long term. The future you will be happy if you hold onto her savings. Keep your fees low. A one percent commission might sound low for a mutual fund, but fees destroy your gains. Find the lowest cost investments. Some are lower than a tenth of a percent today, find them. If you keep thinking that you're managing money for the future you, you should end up with healthier savings habits. Remind yourself of who you're saving for and the goals you want to reach. It'll help you manage your behavior so you're better able to reach your goals.

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