Taking Care of Our Future Selves

The earlier we start saving for retirement, the more we can take advantage of compounding interest and the more we can minimize risk from market swings. As far as financial advice goes, this idea is fairly basic and widely known.

Yet according to surveys, only about 40% of us start saving for retirement in our 20s. Out of the rest, about 25% of us don't start until we’re in our 30s, and 15% don't start until our 40s. This may seem baffling, but there are a few reasons why we procrastinate  on doing something so beneficial and essential to our futures.

Why We Neglect Our Future Selves

When we’re young, retirement can feel like a very distant destination that’s still out of sight, so we get the sense that we still have plenty of time. We get preoccupied with more pressing matters such as getting our careers off the ground, establishing our homes, and possibly starting families. With so many things to deal with in our present lives, it's easy to fixate on our present selves, kick the can down the road, and neglect our future selves.

At a deeper level, while we all hope for a bright future for ourselves and our loved ones, we often don’t have a precise image of what that actually looks like. Because our future is far away, it tends to be a vague idea as opposed to a crisp vision. We don’t see a clear version of our future selves, and so we often don't feel connected to that future version of us. In a series of Princeton University experiments, subjects made far worse decisions for their future selves than their present selves. We tend to think that the future is a problem for the future version of ourselves to solve.

One great way to better connect to our future selves is to think of our future selves as our children. Whether we actually have children or not, we understand the idea of needing to plan for a child’s college education. As a parent, we would care deeply about our children, and we would want them to succeed. By thinking of our future selves in the same way, we can think of them as someone we want to nurture and help succeed—except instead of saving for a college fund, we’re saving for a retirement fund.

A financial advisor can also help connect you with your future self by facilitating a discussion on how you visualize your ideal future, clarifying your motivations, and formulating the best path for you. They can then collaborate with you tocraft a financial plan that will help you meet those goals, and then continually monitor and adapt your plan as you advance in life.

Being Rich Versus Being Wealthy

Whether we think and plan for our future selves depends on whether we choose to be rich or wealthy. When we choose to be rich, we are living for our present selves. Our money is a balance in our accounts that we spend as it comes, and even as we make more money, we find ourselves hoping we don't run out of it. Easy come, easy go.

I have a client who has chosen to live in the present. As his income increased from promotions and pay raises, he spent his new income to remodel his home and buy a new car instead of putting some of it into his retirement fund. As a result, he's become increasingly stressed because the cost of his lifestyle has risen to match his increased income. He feels like he's still just barely keeping ahead of his monthly expenses. While he'll enjoy his new car and upgraded home, his future self will also likely need to work a few more years.

In contrast, when we choose to be wealthy, we are deciding to take care of our future selves. That doesn't mean that we neglect our present lives, but it does mean that we live with a balance between the two. Instead, we use our money as a resource to generate more money by creating a sound financial plan and astute investing. We can also invest in ourselves by upscaling our skills and qualifications, which can improve our ability to generate wealth. Over time, these two approaches will generate enough sustainable wealth to achieve personal and financial well-being.

The major financial decisions you make now will be a trade-off between your present and future selves. While the present is important, don't forget about your future self. Your future self will thank you.