The financial services industry is hooked on encouraging you to save for your future. Of course, this is important because there will come a time when you are unable to work or simply have had enough and want to stop, or can no longer do so. You need to ensure there is enough money for your future self to live the lifestyle you want.
But what if you are future-oriented? So much so that you focus too much on planning your future at the cost of the present.
Future-oriented people tend to have more of a scarcity mindset (full disclosure: that includes me). We are concerned that we won’t have enough in the future so are more conscious about saving today. As such we planning types are likely to save and invest a higher proportion of our income each month and have a comprehensive array of life assurance and income protection policies.
While this is a good thing, and as a financial planner and self-confessed future-oriented personality type I am naturally inclined to encourage it, there are downsides.
You Might Get Hit By A Bus Tomorrow.
I’ve previously argued against the ‘live for the moment’ cliche of potentially getting hit by a bus; it is possible, but not probable. The point is life is unpredictable and can be cruel. If it is not a bus, it could be cancer or another life-limiting illness.
If you are future-oriented and get thrown one of life’s curve balls you will feel pretty bummed if you haven’t given your current self enough attention for fear of letting down your future self. Giving yourself permission to enjoy today as well as planning for tomorrow will provide feelings of gratitude and satisfaction with what you have.
It will also prevent you from looking back with regret at missed opportunities. Before our kids were born my wife and I enjoyed spending our money on travel and fine dining, those opportunities are rarer now but we look back with fond memories and are grateful that we were able to experience them when we did.
Never Having Time or Money for People and Things You Say Are Important.
Because you are so focused on the future, making sure you will have enough for retirement or in the event of an emergency you risk not being true to yourself. You may say things are important to you (socialising, spending quality time with the children, experiencing new things), but being future-focused offers reasons to be contradictory. You will find excuses for not doing these things: “We can’t afford it right now.”, “maybe next year.”, “that’s a lot of money, do we really need it?”
Finding that balance between today and tomorrow allows you to have both. It will also reduce the risk of friends or family members not including you in fun things on the assumption you will say no to them.
Once You’ve Committed to Something, You Won’t Change Course, Even If It Is Not Working For You.
Behavioural economists call it Regret Aversion or Status Quo bias. Everyone else calls it stubbornness. Whatever the correct label, future-oriented people are more likely to stick to a failing plan rather than accept mistakes and change course.
It might be continuing to hold a poorly performing investment because you were convinced it would be a winner. It may be throwing good money after bad on a project that isn’t bearing fruit and, if you are honest with yourself, is unlikely to.
A commitment to a future goal is an admirable trait but where it creates stubbornness, others may accuse you of being dismissive of facts and the reality of a situation to justify continuing to do what you do. At best this will result in disappointing investment returns, at worst it may cause arguments about money with your partner leading to resentment on both sides.
If You Save Aggressively, Spending and Enjoying Your Money Gets Harder Later.
As I remind my retired clients, it’s OK to spend money you have spent a career building up. But going from a lifetime saver to a spender is not a switch you can flick in your head. To bastardise Rachel’s quote in Friends: “Once a saver, always a saver.”
Your aggressive savings habits may get you to financial freedom sooner but what then? If you can’t then enjoy the money, what was the point of being so aggressive with it in the first place? Members of the FIRE (Financial Independence, Retire Early) movement are finding this out. Having given up everything except for basic necessities in a bid to retire as soon as possible, once independence day arrives they find two things: it is hard to spend money on anything but essentials and days can be long and unfulfilling without a reason to get up in the morning.
I’m not suggesting that you change your planning mindset and stop saving for the future. Rather, I’m saying maybe give yourself a bit of a break and enjoy some of your money today. I’m sure your future self will be glad you did.
This budget planner will help you see whether you are possibly allocating too much of your money on tomorrow rather than enjoying some of it today.