Good decisions versus perfect decisions or why you should start saving now
Many times it seems that we expect the perfect opportunities to invest or save. And if they don’t arrive? A good plan may be better than a perfect one.
You will have heard on many occasions that the sooner you start saving the better it will be for your pocket . This, which is true, becomes a fundamental maxim when we think about long-term savings . To achieve this it is necessary to promote the habit of saving . One of the great enemies of the field of saving is waiting in search of great opportunities, something that may or may not come.
Punch or sustained savings
Get for a moment at this end. What would you prefer, what do you get a good prize in the lottery or get an acceptable profitability, sustained over time, for a percentage of your income month by month? You are probably inclined to the good prize in the lottery, it is normal, less effort, less time and more sense of success. But now let’s go down to earth. What are the real chances of the lottery touching you? Compare them with the possibilities of hiring a savings product with an interesting return .
Having bought that tenth prize would have been a perfect decision, but the amount of possibilities for that perfect decision is tremendously low. Dedicating your money to savings is a good decision, sustained over time and thanks to compound interest , the money will work for you and provide you with capital to meet the financial goals.
Why save how much before
There are many reasons to start saving as soon as possible, but in this case we will focus on what is known as The Pareto Principle .
It was first described by economist Vilfredo Pareto . In his approach he shows us the inequality between inputs and outputs. For this, it establishes that 20% of what enters will be responsible for 80% of what is obtained. This applies not only to finances, but to all areas of life.
For example, applied to business, I would say that 80% of revenue is generated by 20% of customers. But also that 80% of the problems and claims are generated by 20% of the clients. Applied to the global economy, the principle tells us that 20% of people accumulate more wealth than the remaining 80%.
Applied to your personal finances
Applied to your personal finances this principle could have two very interesting readings. First of all, it may be that 20% of our way of managing finances is conditioning 80% of our expenses . This would lead us to a thorough review of personal finances. But, also, if we improve that 20% we can reduce 80% of the expenses with which we can allocate them to other areas of our personal finances , such as savings.
But beyond. Applied together in our income, this principle tells us that 20% of our income will be able to generate 80% of the capital we need in the future for, for example, retirement .
Obviously, to get this, or to get closer to it, it is absolutely necessary to start saving as soon as possible . We do not need to wait for the perfect occasion, the fantastic product or the fate of our side. We simply need perseverance, rationalization and saving habits.
As with all general principles we do not need to take it to the letter. But, it can be another reason to reinforce the feeling of need for savings. And, on the other hand, to succeed in the model of long-term savings, sustained and continued, the most necessary and the most difficult to implement .