Wrinkly-you (aka future you) will appreciate it if you take his well-being into account when making today's decisions. Life, as short as it may seem, is an adventure that is best executed with a long-term perspective. Establishing a psychological connection with "future" you may be the key to achieving your best life.
Odds are that in your mind, who you are today is materially different than who you will be in the future. As the time frame between you (now) and you (later) lengthens, you become less and less connected. So much so that you begin to think of future you as a different person.
So how does this manifest in your life? Maybe you aren't saving enough for retirement. That's a big problem for future you. Perhaps you've got to have that shiny new car with the expensive monthly payment. That's future you's problem when your income decreases. Maybe you forgo the appropriate amount of property and casualty insurance. Future you will figure it out. Right?
Hopefully, you don't guzzle down vodka mayonnaise, but like Homer says, "That's a problem for future Homer. Man, I don't envy that guy."
So how can we begin to make better personal finance decisions that encompass all of our selves, past, present, and future?
10-10-10 Forwards and Backwards
I was recently reading Annie Duke's bestselling book Thinking In Bets: Making Smarter Decisions When You Don't Have All the Facts. She suggests a mental model for sensible decision making called the 10-10-10 method.
This method was popularized by Suzy Welch in her book 10-10-10: A Fast and Powerful Way to Get Unstuck in Love, at Work, and with Your Family.
In effect, this brings the future you into your current decision-making framework.
You begin the 10-10-10 process by asking the questions: What are the consequences of my choices in ten minutes? In ten months? In ten years?
If whatever action you are contemplating is beneficial for future you in all three-time frames, then it is probably a sound decision.
Annie Duke expands upon this by flipping the model upside down with a past-looking perspective. She says, "we can build on Welch's tool by asking the questions through the frame of the past: How would I feel today if I had made this decision ten minutes ago? Ten months ago? Ten years ago?"
Utilizing these past and future frameworks allow you to exercise less reactive pathways of your brain and, hopefully, make a more effective long-term decision.
Jordan B. Peterson often cites a similar framework, but he expands upon it. He says a wise decision should be simultaneously good for you, your family, your community, and remain to be good through the test of time.
"Well, if it's wise, then it works in the world, so that'd be the constraint of objective reality. But, then it works for you now. And you that'll be in a week. And you that'll be in a month. And it works for you and your family. And it works for you and your family and society, and it works in a way that those things all line up to be iterated across time."
- Jordan B. Peterson -
Incorporating others (you, your family, community, etc.) into your decisions enables you to see the bigger picture. Envisioning how your choices unfold over time gives you a broader perspective. Often, you get stuck in a granular view of how something feels right now. And the momentum of the situation influences the decisions you make.
All The Benefits In Life Come From Compound Interest
During one of Naval Ravikant's notorious tweet-storms, he said, "Play iterated games. All returns in life, whether in wealth, relationships, or knowledge, come from compound interest."
Making decisions based on a criterion that is good for you, your family, and your community across time will evoke short term sacrifice. But life is a long term game. Many aspects of it are iterated over and over. That is why I like Naval's tweet.
In a 40 year career in which you receive bi-weekly paychecks, you will get 1,040 paychecks. That's a lot of iterations.
What would happen if you automatically contributed $100 of that paycheck into a Roth IRA?
Let's first run it through your decision-making model.
If you put $100 into a Roth IRA every paycheck for the last 10 years, how would you feel? How about for the previous 10 months? Or just 10 minutes ago?
If you put $100 into a Roth IRA right now, would it be beneficial in 10 minutes? 10 months? How would you feel if you had a systematic investment plan in place for 10 years running?
Would this decision be right for you? Would it be right for your family? And, do you think it'd be right for your community?
The only person in those scenarios that might object is current you! Because he or she can come up with many things to spend that $100 on that bring instant gratification.
But, after thinking through the decision using our 10-10-10 framework, it is hard to find justification not to invest the money.
And what an excellent decision it would have been or will be. Your total investment of $104,000 over a 40-year career, would equate to over $750,000 (at 8%).
Investing is an easy example because compound interest is easy to calculate. The concept applies to relationships as well, whether personal or business. Focus on making long term gains with long term people while maintaining a high standard of integrity.
This will create a tight-knit network of friends and family. And if you have that, it should be hard not to view your life as a success.
Making Smarter Decisions
You never acquire ALL the facts surrounding any decisions. Our lives are shrouded in mystery. We often fool ourselves thinking the future will look much the same as the present or past, but odds are it will not.
But, even though you don't have all the information, you can make better decisions by invoking a complete view of the consequences. Don't sacrifice future you's well-being for a few too many double cheeseburgers that the current you enjoy so much.
And always, if you'd like a fiduciary financial partner, guide, and educator to help you define your goals, create a plan, and take action; I am here to serve.
Your Friendly Firefightin' Financial Planner
Forward Focus Financial Planning wants to help you communicate and clarify your financial goals so that you can create a plan and take action. Take the first step and schedule a free planning call today. You only get one chance at living a great life. Define your goals, create a plan, take action, and be confident.
Disclaimer: All written content on this site is for information purposes only. Opinions expressed herein are solely those of Forward Focus Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.