Psychologists working hand-in-hand with financial experts have figured out that the best way for a person to motivate themselves to stick with a savings plan is by envisioning what their future self will look like.
If this sounds a little bit esoteric, it’s actually quite simple. It means taking a look at yourself in the mirror on a regular basis and envisioning what you will like in 20 to 30 years. Thinking about what you would like to say your self about the decisions you are making now, and whether or not you need to apologize for them or thank yourself for them, can give you a real clue as to whether you are handling your finances correctly.
Psychologists believe that the more concrete a person feels about their future, the more motivated they are to stick to a savings and retirement plan. New evidence from the Stanford Institute for Economic Policy Research shows that the technique of envisioning specific future results for decisions being made today is a very powerful motivator and, luckily, everyone can use the technique.
Richard Peterson, a psychiatrist based in Westport, Connecticut, says that “We want to think that the motivation to save is intellectual and academic, but it isn’t at all.” Peterson works with professional money managers as well. He says that “Money provides a security and satisfaction,” adding that “not about the numbers…[but] about what money will do for us and about imagining the life you want to live and the person you want to be [in retirement].”
One problem that Tony Krance, the president of the advisory firm 401k Plan Advisors out of Green Bay, Wisconsin, sees is that Americans are being taught that investing is equivalent to unnecessary risk taking. When you teach people that investing is all about the short-term return, he says, it is much harder to break their mindset and open their minds to the reality that long-term investing is much more valuable.
Krance believes that envisioning their future self and their future payoff for their self-discipline today is a technique that people with at least 20 years to save should take advantage of. Not surprisingly, he feels that a 60-year-old who hasn’t saved enough isn’t going to have as much fun envisioning their future as a 30-year-old who is just getting started.
If you’re keen on using envisioning the future to help you with your financial tasks today, advisers recommend coming up with various ‘what if’ scenarios to envision the kind of lifestyle that you would like to have in the future and the kind of money that he would need to be able to support that particular lifestyle. These factors and scenarios should include things like:
- Travel
- Automobiles
- Housing
- Technology
- Giving to charity
- Giving to your family
- Staying healthy and fit
- Paying off your house
They also advise that, if the priorities that you have today make saving money feel almost impossible, set up a couple of savings accounts and simply have $100 a month directed to them. By doing this you set up an expectation, and a small amount of guilt, that will help you to move in the right financial direction.
In the end, financial analysts and psychologists believe that by reframing savings as the “carrot” and as the “stick” a person can change their perspective, and their beliefs, and when they finally do meet your future self will be in a much better financial state. In other words, your older self won’t have to look back on your younger self with anger and resentment but instead with gratitude.
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