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3 Reasons Why You’re Not Saving And Budgeting For Retirement – And What You Can Do About It

America is the most amazing country on Earth, but we have a terrible habit: not saving and budgeting for retirement.

Since World War II, we’ve gone from being a nation of aggressive savers to one of spendthrifts. How bad is it? Nearly half of us couldn’t come up with $400 in cash to cover a car repair or other emergency. A similar percentage of Americans 55+ have nothing saved or budgeted for retirement.

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Ugly. But new research has discovered scientific reasons why we don’t save – and offer some ideas to help us sock away more cash.

Reasons we fail to save

Present bias. This is a fancy way of saying we always go for instant gratification. Given the choice between using $200 to buy a new outfit or save for the future, our default is to do what makes us feel good right now. Shocking, no?

Life hassles. We often allow the minutia and small tasks of daily life prevent us from addressing Big Picture issues. We know we should get a medical check-up, but we don’t make the appointment because we’re distracted by little chores and obligations. The same is true with money. We put off the important work of budgeting and setting up a savings plan.

Unrealistic budgeting. This one is related to “present bias.” We routinely underestimate the number of “special occasions” and other reasons to splurge. As a result, we blow our budget.

So, how can we remove these obstacles to saving? A group of economists writing in Money magazine suggests a bit of psychological jujitsu – using our bias towards inaction to actually help boost savings. The idea is to establish a system of automatic savings systems that would sweep money into a savings account until the saver takes action to opt out of the program. If it’s automatic, you won’t be able to not save and budget for retirement. In fact, you’ll have to make a continuous effort to sabotage your newly formed good money habit.

An easier way to save for retirement

This idea is an extension of the “pay yourself first” strategy that is a cornerstone of successful retirement savings and budgeting. Paying yourself first means arranging to have your regular retirement savings contribution automatically direct-deposited into your 401k or other retirement account so you never have the opportunity to spend it.

Many companies have recently instituted “opt-out” enrollment in their 401k plans for new employees. The results have been very successful with an increase in employee retirement savings at firms with such policies.

Don’t limit your savings to retirement

The economists would like to see banks offer a similar program for savings. When a customer arranges to have their paycheck direct deposited into a checking account the bank could automatically divert a small percentage of that amount into a savings account for the client until the customer opts out. They suggest this account be labeled “emergency fund” as there is psychological evidence such a label would actually prevent the account owner from using the money for other purposes.

Related: 12 Effective Strategies To Simplify Your Financial Life

Financial institutions could offer a similar option whenever someone opens a checking account. Customers should be given the opportunity to start sweeping money into saving at a future date as we are far more likely to accept a painful task if it begins down the road instead of today. Banks could also learn from the Montana credit union that allows borrowers to seamlessly convert automated loan payments into savings contributions when the note is paid.

Whether these policies will ever be enacted or become widespread remains to be seen. The banks may be regulatory and marketing concerns. In the meantime, armed with awareness of these mental obstacles to savings, we can implement our own solutions by “paying ourselves first” to fund not only our retirement accounts but our emergency funds and other savings accounts, as well.

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