One day, someday... just not today
One of the biggest barriers to saving more for retirement is our own behaviour. There’s one person whose wants and needs we often ignore. That person is the future you. We all have plenty of excuses to make the current you feel good (who hasn’t thought “I’ll start my diet tomorrow”?), but it’s often to the detriment of the future you. So how do you strengthen this connection with your future self to stop stealing from the lifestyle you deserve in retirement?
New research in social psychology suggests that most people think of their future selves as an entirely separate person from who they are today. We tend to think of our future self as a stranger, and this impacts the choices we make in saving for retirement.
“We regularly act in ways that make life difficult for our future selves. It’s one of the reasons we over eat or under save,” says Hal Hershfield, a psychologist at UCLA.
Did you know you’ll probably spend one third of your life in retirement?
So it’s well worth spending a little time now to make sure you can really enjoy yourself.
But how can you help your future self? Hershfield says that we have to find a connection to our future self, much like you would have with your spouse, children or parents. Instead of trying to force your brain into accepting that the current and future you are the same person, he suggests trying to work with it. If your brain insists on believing the future you is a different person, just go with it. But think of them as someone you really want to look after and treat well.
So, what are some other actions we can take to stop being our own worst enemy and to start looking after our future self?
Three behaviours that hold us back
- Avoidance and denial
Let’s face it: we’re human. Many of us avoid facing something if we feel ill-equipped to deal with it. This reality is relevant to retirement, which can mean different things to different people including getting older, lower living standards, ill health or even loneliness. It’s not surprising that many people avoid facing it.
- We want it now... or never
The present is in focus, the future is blurry, so we find it hard to imagine our future selves. When we discount our future wellbeing for the sake of our present enjoyment, we’re valuing the present more than the future. If a hard task doesn’t have an immediate reward, humans tend to put it off: this is standard behaviour and so it takes an awareness of making change in order to overcome it.
- Choice and information overload
For many people, having too many choices is overwhelming. Choices can be simultaneous (for example, a box of chocolates) or sequential (one chocolate at a time). On the whole, people prefer simultaneous (the box with a description sheet), so they don’t waste energy waiting for what may – or may not – be a better chocolate.
From barriers to breakthroughs:
Choose to make saving your responsibility. Ask yourself – what’s the biggest threat to my savings and investments. Is it low interest rates, inflation, deflation or another global crisis? The biggest problem may be you. Many of us are not naturally rational, disciplined investors.
Step 1. Save for tomorrow... tomorrow
Choose to have salary rises or bonuses paid into your super. Or, use your birthday as the date to increase contributions. You could even set up a regular direct debit on pay day to transfer money into your super. Even a small amount can make a big difference.
Step 2. Work with your need for motivation, not against it
Sometimes, motivation comes through control, so create a budget or a financial goal – and focus on the control this gives you. This may motivate you to spend less and save more.
Step 3. Cut yourself some slack
If you’re creating a budget, ease off on the pressure to have 100 per cent willpower all the time. Cut yourself some slack and allow yourself an affordable treat, perhaps once a week.
Step 4. Reward yourself
Reframe the way you think about money – reward yourself for saving rather than spending. Or, think of rewards as large and small – the large reward can be investing the $500 you’ve saved; the small reward can be an extra coffee and cake.
If you need a little more help, call our Client Services Team on 1300 660 027 between 8am and 5pm weekdays or email firstname.lastname@example.org
All information contained in this article is sourced from Russell Investment Management Limited (ABN 068 338 974).and is considered to be reliable however is not guaranteed. This article is issued by the Trustee of The Victorian Independent Schools Superannuation Fund (ABN 37 024 873 660, RSE Registration number R1000436, MySuper Authorisation 37024873660599) VIS Nominees Pty Ltd (ABN 11 006 586 367 AFSL number 235097, RSE Licence number L0000321). The information provided in this article is general information only and does not take into account your personal financial situation or needs. You should consider obtaining advice that is tailored to suit your personal circumstances.