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The All-or-Nothing Trap

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On a perfect day, you look fabulous, your children behave well and present good report cards, your boss gives you a raise, and your investments perform outstandingly well. Then there's reality, full of bad-hair days, unruly children, cranky bosses, and money mistakes.

Striving for perfection keeps us human. It helps us make a tiny bit of progress toward our goals every day. But when we strive and fall short, we sometimes abandon the goal. This all-or-nothing trap may stand between you and your wealthy future. Do these statements sound familiar?

"I'm not contributing to my IRA because I can't deposit the maximum this year."

Balderdash! The laws set maximum contribution limits for each year, but there's no law that says you must hit that target. If your savings goals fall short, just contribute as much as you can. Unfortunately, because of the annual contributory system, you can't catch up later when you've got plenty of money to spare. Take the opportunity now to save what you can.

"I can't save enough to send Junior to college, so I'm not saving anything."

College costs can scare any well-meaning parent into total paralysis, but take a deep breath and consider this: Financial aid sounds great, but it more frequently means loans instead of grants or scholarships. The more you save for college now, the less you (or your aspiring scholar) will have to borrow. Put away anything you can, and take advantage of tax breaks offered by education savings accounts.

"I can't invest until I have enough money."

Yes, it takes money to make money, but it doesn't necessarily take a lot to get started. If you're waiting until you've saved a really large sum, you might be missing an opportunity by keeping your money on the sidelines longer than necessary.

You can start your investing career by purchasing as little as one share of stock with a dividend reinvestment plan (or DRIP). Those plans let you get started investing with less money than you think, often less than $100. And a wide variety of companies, including FedEx (Nasdaq: FDX  ) ,Yahoo! (Nasdaq: YHOO  ) , and Microsoft (Nasdaq: MSFT  ) , allow DRIP investing.

"I can't buy any stock until I've developed the perfect portfolio."

If every investor waited until constructing the ideal portfolio before putting money in stocks, Warren Buffett might be the only one buying and selling out there. Most portfolios exist as works in progress. You will change your investments as companies, your investing goals, and your tolerance for risk evolve. Don't let that stop you from taking the first steps.

"I've lost a little money, I have to sell everything!"

The current market gyrations may cause your stomach to flip and set your heart aflutter, but acting rashly to buy or sell can be a recipe for buying high and selling low. If you see one of your investments doing poorly, certainly re-evaluate whether it's a good idea to stay invested in that company, but don't let one loss spook you into selling everything.

Every little bit helps toward reaching your retirement goals. The Fool's Rule Your Retirement newsletter can tell you how to take those first small steps on the way to a successful retirement. Check it out to see how you can save more, invest better, and earn yourself the retirement you deserve.

Prashant Rathore updated this article, originally written by Mary Dalrymple and published on Jan. 16, 2008. Prashant has no financial interest in the companies mentioned above. Microsoft is a Motley Fool Inside Value recommendation.The Fool has a disclosure policy.

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