As humans, we often see things in the now. Sometimes, it can be hard to look beyond what is happening right now and see the big picture of the future. It can be easy to forget long-term benefits as we look at short-term possibilities.
However, if you want to reach your goal of a successful retirement, you need to remember the long-term, and spend some time focusing on the big picture things.
Don't Let Current Worry Push You into Poor Financial Decisions
One of the worst things you can do is let short-term worries push you into making poor financial decisions. It's easy to panic when the stock market drops. Everyone else is freaking out and selling. Before you join the herd, though, think about the long-term. Over time, the stock market tends to gain. So, if you have well-chosen investments in your account — investments with solid fundamentals, or index funds that track the market — you are more likely to weather the downturns.
Instead of panicking and selling, consider whether or not you should stay the course. Chances are, especially if retirement is still 15 to 20 years away, that your portfolio will recover in the long run. If you panic and sell, you could easily end up missing out on some of the opportunities that come with buying more at a discount, and reaping the benefits later.
Be Wary of Using Your Retirement Account as an Emergency Fund
When times are tough, it can be tempting to ease the current situation with the help of a little extra infusion from the retirement account. It is possible to borrow money from your 401k, and even use your Roth IRA as an emergency fund, without incurring tax penalties. However, while this might be a short-term solution to your current worries, you might not benefit in the long run.
Having that money taken out of your account results in an opportunity cost. You are no longer earning interest on the money, and there is no getting that time back. With the 401k loan, you will probably pay it back (with interest) in order to avoid the tax penalty. However, when you withdraw contributions from your Roth IRA, it's difficult to find the will to repay the money, since there are no penalties for withdrawing your contributions.
Remind Yourself of the End Result
Make it a point to remind yourself of your end result. Sometimes, when we are in the moment, and concerned about what's next, we make snap judgments that put the future at risk. Instead, take a step back, breathe deep, and consider your alternatives. While you might have to turn to your retirement funds at some point in order to stave off a true financial emergency, consider other options first. Can you make more money? Are there ways to cut your expenses?
Really think about how your current actions can affect your future. Realize that there is a very real chance that you end up with serious problems related to your retirement finances if you allow what's happening now to throw you off your long-term goals. Remember the big picture, and take steps to ensure that what you do now will keep you on track.