Unlike other species, humans have the ability to see themselves, through a combination of memory and imagination, in the past and the future. We would think that with such an ability it would be easy for us to make wise, long-term decisions – whether it is regarding our physical health, mental health or financial health. We should be able to project how our future self would want us to act now, in order to avoid those vices that could be detrimental, and ensure we are doing all the things we need to ensure our future is optimized. So what goes wrong that so many of us don’t set ourselves up for success in all these elements of our lives?
In theory it’s all quite simple. For example, I would think we all want to be healthy, although obviously there are many elements that are out of our control. However, if we know that eating healthily and exercising regularly will help avoid diseases such as diabetes and heart problems, why do so many of us ignore that fact?
Similarly, in a financial sense, it should be intuitive for us to start saving when young so that we have ‘emergency savings’ to see us through tough times when our income is affected by either macro events, such as covid or a war, or micro events, when we might lose a job for instance. If we hope to live comfortable lives after retirement, it should be obvious that most people need to save for decades in order to build the resources to live comfortably when we no longer want to, or are able to, earn a living.
Viktor Frankl describes in his book, ‘Man’s search for meaning’ how he got through the war. He envisioned himself standing in a room giving a lecture to university students in which he described what he had learned from being in the Nazi concentration camps. His vision of his future self gave him hope and purpose, propelling him forward.
We all have the ability to learn from the past, and envision our future. Retirement planning should therefore be a breeze and we should all be set up for a comfortable retirement … or not.
Framed for failure
The Israel Democracy Institute ran 3 surveys in April, July and December 2021, in which respondents were asked if they had liquid resources to carry them through a period without income due to covid. The statistics were similar in Israel and the US. In April about 25% said that they had no liquid funds, a figure that rose to 31% by December. Of those who did have liquid funds, about 40% said these emergency savings could sustain them for up to 2 months without income. Only 18% said they had sufficient funds for 6 months of no income.
Whereas we can hope that the covid fallout was a rare situation, in Israel we have experienced events over the last 7 months that challenge that assumption. Maybe these disruptions happen more often than we think. In which case, where does that leave us? Why do we discount the importance of our future selves and fail to save for our future?
I believe the most common mistake is our lack of considering our future selves. Our lifestyles involve immediate gratification. Our current vision of who and what we are overwhelms our future conception of what we will want and need.
We are almost setting ourselves up for failure as our surroundings conspire against us looking ahead, encouraging us to live in the moment. We are surrounded by marketing hype persuading us to make purchases that we will never regret, that will increase our quality of life, that we truly can’t live without. Sound familiar?
Re-frame for success
However, this does not need to be our reality. Our mindset can help us to be forward thinking, by strengthening the connection between our current self to our future self in order to counteract the natural bias we have to live in the present. It’s not that living in the present is a bad thing. In fact, many people have the opposite issue of not living enough in the present and obsessing about the future – but generally this doesn’t apply to financial planning. Think ahead. Visualize your future self at critical times and how you would like to see yourself arriving at your future state. By increasing your awareness, you will start planning to strengthen your vision. Consider writing your future self a letter where you can crystalize your priorities and generate ideas of how to get there. The more vivid your visualization, the greater the chance that it will help lead you towards actionable steps.
- Set up an automatic direct debit into a pension or savings account. Make it an amount that you will not miss significantly in your monthly budget. Adjust your spending accordingly and you won’t notice the lack. Living in Israel we already have a ‘big brother’ helping us. The Israeli government has essentially forced all Israeli citizens to have pensions and savings accounts. Whereas these are not sufficient on their own to fund a comfortable retirement, they are a great start. Utilize the same concept by setting up automatic savings plans that can help you save towards your retirement.
- Think of all the people who you may need to be responsible for, to whatever degree, in the future. Bringing others into your long term planning can help push you in the right direction as you develop your sense of responsibility. If you find it too overwhelming and need additional help, consult a professional.
Our minds are incredibly powerful. Envisioning ourselves in our future will inspire us to disconnect from the noise around us, that is misdirecting and misleading us. The retirement of your dreams can be a reality – you just need to visualize it and make it happen. If you need additional help, consult a professional. Behaztlacha!
With heartfelt prayers for the safe return of our hostages, the safety of our soldiers in all their missions, and the security of our nation.