A Message From Your Financial Future: Thanks for Keeping It Real

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I had lunch with a friend recently, and as friends will, we discussed the ups and downs of our lives. The conversation turned to the dumb things we did when we were younger. I told the story of the worst job I ever had. He confessed a few of his own mistakes. “What sucks,” he said, “is that you make these decisions when you’re younger, but then it’s your future self that has to pay for them.” So true.

For instance, I used to hate my job selling boxes for the family business. I thought I wanted to be a computer programmer. For years, I dreamed of changing professions. Eventually, I got the education needed to land a computer programming job. My income went up, as did my spending. But there was a problem. I hated computer programming. For me, it was worse than being a box salesman! I quit and returned to the lower-paying job, which no longer seemed so awful. I wondered how I could have been so wrong about what would make me happy.

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It’s not just me. Sometimes your future life fails to live up to your expectations, and sometimes it exceeds them. But in nearly every instance, you cannot predict where life will take you. In fact, studies show that strangers are better at guessing what will make us happy than we are. No wonder your younger selves often do such a poor job of setting things up for our future selves.

How tough is it to predict your future path? Here’s a simple test: Think about where you were five years ago — where you lived, who you spent time with, what you did. How does that compare with where you live today, who you spend time with, and what you do with your time? Chances are your life today is much different than it used to be — and much different than you might have predicted it would be.

When I speak to college students, I warn them to not spend based on their expectations for the future. Don’t spend a Christmas bonus you haven’t yet received. Don’t buy a house just because you think you’ll soon have a higher salary. It’s tempting to believe your future self will be richer, smarter, stronger, and more successful — but that doesn’t always happen.

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What can you do about it? How can you strike a balance between today and tomorrow? There’s no mystery. You can fund your future by making smart choices in the present, including:

  • Have a plan. Based on who you are today and what you know about life, set goals for the future. Sure, these goals may change. That’s okay. Use these goals to create a budget or financial plan in the here and now.
  • Practice conscious spending. Stop spending on the small, unimportant stuff so that you can afford the things that matter to you. This requires long-term thinking, but it’s worth it.
  • Avoid debt. Don’t expect your future self to be able to cope with the financial mistakes you make today. Don’t make things tougher for yourself than you have to.
  • Save for retirement (and other goals). Remember the extraordinary power of compound interest: The more you save today, the less you need to save tomorrow.

To stop making poor decisions with money, it’s often necessary to ignore fantasy and deal with reality. Instead of counting on the future you to save the day, do the hard work now. Your future self will thank you for it.

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