We are all terrible at thinking about the future.
So I don’t mean we’re bad at thinking about futuristic developments or innovations – that’s possible and useful and happens a lot.
And I don’t mean clairvoyance and crystal balls – that’s impossible and a waste of time (but it also happens a lot).
I’m talking about our ability as humans to think about our future and then relate that future to decisions we make in the here and now. The technical term for this is an intertemporal choice.
I prefer to think of it as the Problem of Three Sharons. There’s Present Sharon, Past Sharon and Future Sharon.
They are all the same Sharon, but just at different stages in time.
Of course, no actual person called Sharon in this story bears any relation to any Sharon, who is an Isle of Man Financial Planner…
Let’s meet the Sharons
Past Sharon is set in her ways.
She’s the combined total of all the decisions made up to this point in time – I also think of her as “my life so far”.
Past Sharon has a very peaceful existence because she never has to make any decisions. Her path is fixed.
Future Sharon is the opposite of Past Sharon.
She’s raw potential, the blend of all the possible decisions I could make and futures I could experience.
She also has a very relaxed life. Although her path could go in many directions, she never has to worry about them because she doesn’t have to make any choices.
Present Sharon has a rough deal. She’s the one who has to make all the decisions: what to have for lunch, what to write in an article, or whether to buy a new sofa.
She has to deal with the situation given to her by Past Sharon, and also think about what direction Future Sharon might want to go in.
And she never gets a day off.
The problem with Present Sharon
Present Sharon does her best. But she’s got a lot on her plate just getting through the day (especially if Past Sharon decided to leave something to the last minute, or was forgetful, or had a bit of a late night).
And because she’s always running to stand still, she makes a critical mistake.
She’s too optimistic about Future Sharon. She gives Future Sharon all the magical qualities that Present Sharon currently lacks – stronger willpower, a healthier approach to life, a better bank balance, more time to think.
Once she’s given Future Sharon all of those attributes, it then seems much more sensible to leave the hard choices to her too. So, Present Sharon tends to kick complicated things into the long grass.
Unfortunately, when the time comes to make the tough calls, it turns out Future Sharon is nowhere to be found. It’s just Present Sharon again, and now the tough call is just another of those things left to her by Past Sharon. It’s incredible how often this happens!
The extended holiday you aren’t thinking about
We all have these three individuals running our lives. We all know how easy it is to let the future version of ourselves be the one who doesn’t eat poorly, saves money, and stays in contact with forgotten friends.
We all know how easily those commitments get forgotten in all the stress of the present day. There’s always tomorrow, right?
There’s one big choice that is so far ahead for most people that it almost always gets lost in the fuzziness of the future. It’s retirement.
The problem of intertemporal choice is that what’s happening now always looms larger than what might happen in a week.
And, what’s happening in a week looms larger than what’s going to happen in a year or ten years’ time.
When we look really far ahead in our own lives, there’s such a fuzzy maze of the possibility that it seems irrelevant—definitely one for Future You.
There’s one big choice that is so far ahead for most people that it almost always gets lost in the fuzziness of the future. It’s retirement.
I’m not talking about saving for retirement – I assume that if you’re reading an article by this firm of Financial Planners, you’re on the right track!
I mean the time you’ve spent thinking about what you will do in retirement.
If you’re packing one day, hopefully soon for a holiday (I know, I know, sensitive subject), you’ll spend a fair chunk of time preparing and packing.
You plan what you’re going to do in those two sun-kissed weeks (sorry!), plan a few meals, a day trip, where you’ll go in the evening.
For once, Present You is making sensible decisions about the time ahead.
Our Financial Planning process is designed to help you and your family achieve important long-term goals like buying a house, sending your kids to University, and enjoying a secure and fulfilling retirement.
To set those saving and investing budget items in stone, pay your future self first by automatically deducting contributions every month. By committing to those investments in your future, you’ll also be committing to the rest of your budget.
Whenever your life and money are about to turn a corner, talk to a professional who can help you sort through your options. We certainly want to be on that speed dial, so if you need to discuss long-term goals, short-term concerns, or anything in between, don’t hesitate to get in touch.
With thanks to Ben Kumar, Senior Investment Strategist at 7IM for his version of this article which first appeared in February 2021.
