Imagine: It's April 2009 and your company is having a meeting for a 2009 benefits plan....
Still stinging from the market crash of 2008, everyone is tentative at best and terrified on the other end of the spectrum.
"OK everyone, a show of hands...how many of you are going to want to be part of our new 2010 benefits program? Corporate is matching up to 50% of your contributions to your 401K. That means if you put $15,000 in your 401K, the company will put in $7,500. Do understand that you can't begin this until January 1, 2010!"
"Sure thing, that's still 8 months off and by then I'll be able to make a big contribution to my 401K plan!"
From a simply rational perspective, if someone trusts their company, the company that is setting up the program and the markets....(play along with me here) and there is a "safe" money market fund, this is a no-brainer.
Every person should say "yes," contribute at LEAST the maximum amount that will cause the company to kick in....and chalk up a tidy $5000 return on investment.
(Read that as, "Yessiree, I'm smart enough to take all the free money I can get.")
Of course!
"Just write down whether you want to put in 4%, 6%, 8%, 10% for your 401K."
If the guy is making $100,000 per year and he puts in 10%, he can put down 10% and get a $5000 return for his money from his employer.
Can't beat that.
Makes sense and it is an instant snap, "Yes!"
Now, imagine that meeting never happened...and move it nine months in the future. It's now January 3, 2010.
The same meeting with pretty much the same purpose is about to transpire. The difference is the employee contributions begin immediately.
Starting this week, money is going to be "taken" from their "check."
The research is abundantly clear.
Where the majority of people say "yes," back in April, they say "no" in January. In the first instance, they focus on what is in it for them. In the latter, they are thinking about having money "taken" from "their check."
KEYPOINT ONE: If you can make the sale today and take payments beginning on January 1, NEXT YEAR, you are much, much, more likely to make the sale.
In fact, research shows that when you ask people if they intend to do just about anything *next year*, they will affirm that they are going to give the OK and say they will participate....
What's interesting in the above scenario is that many of the people in the first group...the one in April, say "yes," and then they don't think about it again...
They get to December when it's time to fill out the paper work which amounts to a signature that affirms that the employee wants FREE MONEY and........many of the employees will not pull the trigger and watch all that money "taken" from their pay check. They opt out of the big 10% completely, ...or only ask for a little free money from their company.
But remember, people don't think rationally.
Think about it.
Why are they working at a job they don't like in the first place?!
They will refuse to take FREE MONEY; which is the ONLY reason why they are working there!!!
Or worse, they don't connect with the notion of getting FREE MONEY and refuse to take any of it! Why? What is wrong with this picture?
They get SO upset when they get a 2% raise instead of a 3% raise (that would be a difference of $1000 with an income of $100,000 annually, but they REFUSE to take $5,000 with no strings attached.) They DON'T have to work harder or longer hours. They simply say, "can't do it."
Zowie.
[And do understand that the world has changed in the last 12 months and if someone believes that at some level investing is extremely risky, and it probably is, then they shouldn't be at a job in the first place. They really need to be at work for themselves to dramatically increase their income. All this for another day.]
Another example of influence and the perception of time....and how it can make you money...
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Every person should say "yes," contribute at LEAST the maximum amount that will cause the company to kick in....and chalk up a tidy $5000 return on investment.
