Know thy future self
One of the greatest challenges I believe we face when thinking about retirement planning is how we view our future self. It’s said that we view that person as someone else, a stranger to who we are right now.
Let me present you with two choices – you can choose to spend on your familiar self today, the one you see every day in the mirror; or you can save for this mysterious figure out there, somewhere in your distant future, who you don’t really know. Who would you choose? Well typically, you’ll make the easy choice. You’d much rather feel good now, without really taking the time to think about how this might impact your future self. When it comes to retirement planning, you’ll be less inclined to engage with it, which in turn means you’ll potentially save less, or nothing at all, without fully appreciating the impact of your behaviours. This is present bias in action.
In many ways, this behaviour makes a lot of sense. Why would you want to save for this future stranger you don’t know and can’t relate to. Who is it anyway? Why would you recognise the person you might become. You’ve probably never given it any thought. You live for the here and now. Why would you worry about tomorrow? Well, that tomorrow will come round sooner than you think.
Take a snapshot of your life right now – did you really anticipate you would be where you are right now? It feels like yesterday when you were running through the woods as a young child, playing hide and seek, making up stories and adventures to pass away your carefree day. Time, as they say, goes fast. Blink and you might just miss it. If you blink too long you might well be faced with that mysterious future stranger, except this time it won’t be just a distant thought, it’ll be you staring back in the mirror full of confusion and regret.
There’s a simple way you can start to challenge present bias and engage with your future self on your journey to financial independence. Take a piece of blank A4 paper and draw out your future self. You can make it as richly detailed as you like. Have a bit of fun with it, add some wrinkles, a few extra grey hairs, and really think deeply about who you want to be and what you want your financially independent future to look like (an animated stick figure is perfectly okay for those less artsy people out there!). Once you’ve done that fill the blank space around your drawing with lots of bubbles. Within those bubbles start to think and answer some of these key questions:
What do you want financial independence to look like?
What age would you like to be financially independent?
How will it all look and feel?
What will you be doing? Still working? Part-time? Traveling the world?
How will you spend your free time?
How much is enough? What income would you need to live the life you want?
How would it make you feel to achieve that income and lifestyle?
[Insert other goals/feeling/emotional questions here you come up with]
Just by taking the time to complete this visualisation process, you can lift some of the fog that surrounds that mysterious stranger in your future. It can all start to look and feel that bit more familiar and relatable. You can start to see a real future, one you would quite like to star in. With that clear vision, you can hammer in your first flag in the sand. You now have something you can aim for.
That’s not to say it’s all going to pan out the way you expect it to. After all, you know you’re strapped onto the unpredictable rollercoaster of life. You might choose or have to move that flag in the sand left, right, backward or forwards as you go. The important thing is you have direction, which in turn brings forward momentum. With that momentum, you open your world up to endless possibilities.
When you get to know your future self you can start to make some of these fantastic impactful financial decisions, like contributing that bit more each month to your savings and/or increasing your contributions with every wage increase or bonus. You can really get engaged with where you are financially and how it all might look in the future with the right planning. So lean in, get to know your future self, and see where it takes you.
Keith Boyes
Managing Director
Chartered Financial Planner
Spentwell.
Shall we get to know your future self? Get in touch at team@spentwell.co.uk and let’s get you engaged with your financial future.
Guidance only. Investing in the stock market does carry a degree of risk and returns are not guaranteed. Be aware and understand the risks involved before participating. If in doubt, please seek professional advice.