Don’t save for a stranger
Your brain sees future you as a stranger.
Scientists with brain scanners have shown without a shred of doubt that humans are intensely focused on the here and now.
When we think of our present self, our brains light up with warmth and recognition.
But when we think of our future selves in 20 or 30 years, the light of recognition dims so much it’s like thinking of a stranger.
No wonder we’re such poor savers. Who would bother saving for a stranger?
Nigel Latta’s Mind over Money TV show has taught us a lot about why people behave irrationally with money, but this was the big one for me.
It not only explains our failure to save, it explains why we’re so willing to borrow to spend on stuff.
It’s not us who has to pay back the money. It’s that pack of strangers- our future selves!
But there are people who behave as though they do not suffer from what is known as the ‘‘two self’’ saving problem as the me now/future me dilemma is known.
I’ve met many in my professional life.
I count five things many have in common:
1. Many are worriers, often as a result of some external factor that made them value financial stability. This could be the early death of a father (my case), or a poor upbringing (not me). It could be working in an industry they love, but which has seen a lot of redundancies (Me again).
2. Many are the inheritors of a tradition, coming from families which weren’t big spenders. Learned habits are often our default settings.
3. Many are financially aware, and willing to learn. They knew what capital growth and compound interest are, and want them working for them.
4. Many are individualists. They hate the thought of being average, and want enough money to feel free, or at least freer.
5. Many are goal-oriented, and those goals are often relatively short-term goals.
Money writers like me generally chastise readers for not having long-term retirement savings plans. But, really, for many years I didn’t have anything like that.
‘‘Scientists with brain scanners have shown... that humans are intensely focused on the here and now.’’
I’ve always been in workplace super/KiwiSaver since I started work, but that was just to get the matching employer contributions. It wasn’t part of a grand plan.
My real money goals for around 15 of the last 20 years were framed as a series shortterm sprints to pay off mortgage debt. How much could we pay off by the end of the year?
For me saving and getting clear of debt was my way of freeing my present self from worry. It was all about present me feeling better about life, and that included near-future me, who didn’t seem a stranger at all. In time, the sprints started adding up to a plan.
Many of us are worriers. I wrote just last week that six in 10 adults were worried about their levels of debt.
Perhaps some of us are better forgetting about our future stranger-selves, and instead focus for now on using money to reduce the worry in our daily lives.