Thinking of our future leads many of us to become anxious or disinterested. We tell ourselves things such as:
It will be easier to save when I am older
It is ruining my current buzz
I won’t live that long anyway
Someone else can take care of me
I have plenty of time
When we tell ourselves these ‘stories’ we believe them to be true. But most of the time they never are true.
Let’s debunk these common thoughts we tell ourselves
1/. It will be easier later
We often tell ourselves we will start the diet next week, or we will go to the gym tomorrow, or start saving for retirement after the mortgage. Then we discover we can’t after the mortgage because we now have children’s university to pay for. Then we need to help them with a deposit for a house. There is always something that is competing for our money, whether that is now or in the future. Tomorrow is not easier than today. In fact, the longer something becomes a habit the harder it will be to break. So, if we have a habit of only taking care of our present needs, and not our future needs, we will find it very hard later in life to reverse this habit. It will feel like much more of a sacrifice than if we did it now, because if we act now we haven’t become as accustomed to that way of life yet.
Another way that saving for your future is easier now rather than later, relates to compound interest. Simon starts saving $200 a week from age 40 to age 65 with a 5% investment return. At age 65 he will have approximately $520,000. Garfunkel on the other hand, starts saving $200 a week from the age of 30 to age 55. Same savings rate and also for 25 years, but he started 10 years earlier. At age 65 Garfunkel will have $849,000. They both saved $260,000 over 25 years. The difference is Garfunkel had his money accumulating for an extra 10 years with compound interest doing all the heavy lifting. He didn’t need to contribute a cent extra. Simon received just $260,000 (50%) of his total in interest payments, whereas Garfunkel received $589,000 (69%) of his total in interest. To equal Garfunkel’s savings, Simon would need to contribute $425,000 of his own money over 25 years. $165,000 more than Garfunkel out of pocket just because he started 10 years later. Start now.
2/. Long term thinking takes away from the present moment
The key here is to have clear goals of what you want to achieve in the future. That way you will be able to clearly see your future life. It is easier to remain disciplined when you can see this path. Then any decisions you make now that benefit the future version of you, are not seen as taking away from the present, but adding to your future. Your train of thought moves from that of deprivation to one of fulfillment.
When we have clear goals we can determine what we value most in life. For me that is family, friends, exercise, meaningful work, and food. I enjoy watching sport. However, if I have the choice to pay $100 a moth for Sky TV or save for the future, I am going to save for the future. That is because watching sport is not one of my top values or goals in life. My present self will suffer a little bit, but not as much as my future self would have suffered due to having less money available to fund my more important values.
On the other hand, if an opportunity presented itself today for my family to go on a holiday for our father’s 60th birthday then we would gladly spend the money today. This is because family is such an important part of our lives.
You see balancing the decision between spending money now or later is not about deprivation. It is about choosing the best option that will bring you the most happiness at some point. That point could be now, or it could be later.
3/. I won’t live until I’m old so what is the point
Unfortunately, you have no say in this matter. You could live to your 90’s, even with unhealthy choices. It is best to make plans in case you do. I am making plans to 100 years old because the fear of running out of money before I kick the bucket is real.
4/. Someone else will take care of my needs
In New Zealand we tend to be laid back folk with a she’ll be right attitude. We think if I fall, the ‘system’ will take care of me. In an ideal world, we will still have a good welfare system in the future, but this is no guarantee. We can’t necessarily rely on family being around to help either. They may, or they may not. I don’t like to plan on maybes and neither should you. Because if we do, we may end up in poverty. Even the current superannuation is not enough so do not rely on this.
Recommendations to make the choices between the present and future a bit easier
1/. Have a strong vision of your future that is worth fighting for
The stronger the vision we have of our future self, the more likely we are to take care of them and make decisions that do not neglect them. With a strong vision we will not see future oriented decisions as deprivation for our current selves, but as consideration for our future self.
2/. Set clear goals
Goals provide good targets for us to shoot for, and targets are motivating. Saving for retirement for example, is a long-term game. Having goals that break up the journey, make the journey much more achievable. For example, I have a goal to retire at a certain level of wealth in 12 years. That on its own is a long time to stay motivated. In that case, I have set smaller targets or goals that I want to achieve every year. This makes the journey more real and more motivational knowing I am meeting targets on a regular basis. When you meet a target it is a good feeling. That is a feeling you want to repeat.
I’m sure you have heard the saying “pay yourself first.” This is what I mean by automation. Set up your bank accounts so that as soon as you receive income, a portion goes into your future oriented accounts. Such as house deposit, savings, investments, etc. You should only leave enough money to cover your monthly spending needs.
The payments are automatically made by your bank, so you don’t need to do anything. Since the money doesn’t hit your account for longer than one day, you can’t spend it. This takes out the emotions. We all have weak moments where we spend money we shouldn’t have. Automatisation removes the opportunity for us to make these mistakes by not even allowing us access to our money. Once you get used to this, you won’t even miss it.
4/. Practice gratitude
There is a lot to be thankful for. Often it can be the simple things in life. Family, health, friends, and a full-time income are some examples. We now live in a society that wants things quicker and better. Technology is always improving. We are inundated with options that would have never been possible 30 years ago. Internet, cell phones and big houses are now the norm. Previous generations survived without so many luxuries, so can we. The problem is though, we don’t see these things as luxuries. We see them as normal. We need to get back to basics and be thankful for the simple things in life. Then, when we make a decision that benefits our future self, we won’t see it as present-day deprivation. This is because from a place of gratitude we are setting our focus to things that we currently have, not things that we don’t have.
5/. Learn from those older than you
Older people are a wealth of wisdom and often an underappreciated part of society. They have so many experiences and untold wisdom we can benefit from. Ask an older relative about personal finance or their life in general and see what nuggets you find. Older people have had time to reflect on their lives and can provide information that could save you many years of bad decisions. Common regrets of older people often include things such as not starting to save earlier, putting work before family, and not making the most of experiences. We will remember our experiences, not material possessions. Learn from these lessons.
6/. Recognise your habits
I have written previously on habits and how to recognise them here. The key thing is to first recognise all your habits. This can be easier said than done. Some habits, such as getting dressed, are so deeply ingrained, that we do them with no conscious thought. Try to bring all habits to the conscious mind and determine if they are good, bad, or could be better. Then you should keep your good habits and remove or replace your bad habits.
Remember, your habits should be consistent with your long term financial goals. Good habits that get you towards your goals will make life so much easier for you. Just like the practice of gratitude recommendation, good habits will also help future made decisions not feel like you are making present day sacrifices. It will just be ingrained behaviour that you will not notice. Habits can be difficult to form, but over time they will become less and less taxing on your mind and time.
The longer the timeframe for saving, the harder it tends to be. It seems like a constant battle between now and the future. If you want to make it easier, then stop the battle. Don’t let either side win. Give yourself enough to achieve your future goals whilst maintaining your current level of happiness. That is the sweet spot. If you focus too much on the future, you will miss out on important events today. If you focus too much on today, you will not thank yourself in the future.
The future can seem a really long way away and a problem that can be saved for another day. However, the problem gets louder and bigger the longer we leave it.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here
Share your thoughts below. Are you future or present oriented? What things did you do to help become more focused on the future?