This guest blog was written by Chris Budd, who wrote the original Financial Wellbeing Book as well as The Four Cornerstones of Financial Wellbeing. He founded the Institute for Financial Wellbeing and has written more than 100 episodes of the Financial Wellbeing Podcast.
There is a dilemma at the heart of financial planning that explains why we so often fail to take the steps now which will benefit ourselves in the future. Connecting with our future selves is one of the keys to successful planning.
How your brain works
While studying the brain, neuroscientists discovered that we use one part of the brain when thinking about ourselves, and a different part when we think about other people1. They wired up the brain and observed that different parts of the brain light up when we think of someone else now to when we think about ourselves now.
They then found something remarkable. When we think of ourselves in the future, the part of the brain that lights up is the part that thinks of other people. When we think about our future self, we treat them as if they were a stranger to us.
This is one reason why so many of us find it hard to save and to plan for the future; to put money, into a pension fund, for example, feels like we are giving our money away to someone else.
3 ways to connect
To envisage our future selves, we need to be able to make a connection. This must happen on three levels:
- Physical
- Emotional
- A clear path
Only when we make a real connection with our future are we likely to treat our future self less like a stranger. This can then have an impact on whether we take action now.
Physical connection
In order to make a connection at a physical level, we need to be able to see our future selves. There are several ways of achieving this. One could be the use of an ageing app. If you see a picture of yourself at the age at which you are planning for, perhaps by using an aged picture of yourself on the front of a financial plan, this is going to create a physical connection. However, this might not work for everyone – not all of us are comfortable seeing ourselves aged.
Maybe your future objectives involve something physical. For example, moving to live by the sea. Using images of the future can help create a firm connection. Put a picture of the seaside on your fridge, for instance.
This tip does need a caveat: it’s not always good to create inflexible plans. Things change, and one should try to choose images that create a general direction, rather than a fixed destination. In the example given, it might be a modest and generic place by the sea, rather than an expensive house in a favourite location.
We are trying to create a connection to a desirable and achievable future, not dream of big things to inspire us to work harder.
Emotional connection
We are more likely to feel connected to our future self when that self is based upon our own assumptions and desires. One piece of research found that people who strongly identify with their future selves are six times more likely to contribute significant amounts to their pensions. They also enjoy their work more and find it more meaningful2.
One strong motivator is having meaning and purpose. What will make you feel proud in the future? Take some time to envisage what a day in the future might look like. From waking up and making breakfast to heading out for the day. What do these look like? Where are you? Who are you with?
A clear path
One of the five key pillars of financial wellbeing for the Institute for Financial Wellbeing (IFW) is having a clear path to identifiable objectives.
If we were to insert “your future self” in place of identifiable objectives, then we can see that the next important part of the process is to create a series of steps to go in that general direction. This will help test whether that future self is realistic. Your financial plan can test different scenarios to see which might be possible and which are perhaps a little unrealistic.
Conclusion
Our inability to picture our future selves has been an unconscious inhibitor for financial planning over the years. Now that we know the challenge in front of us, we can create a better image of our future and create a clear path towards it.
1Your Future Self by Hal Hershfield
2From Aegon’s Centre for Behavioural Research, as recounted in Your Path to Prosperity by Thomas Mathar
Please note:
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.