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The degree to which you’ll change in the future is one of the most difficult aspects to account for in financial planning. The things that matter most to you today likely won’t be the same things that matter a few years from now. Change is inevitable.
It’s both interesting and instructive for long-term clients to look back at how their goals have changed over time. Oftentimes, what was top of mind a few years ago, doesn’t even make the cut today.
Your life will change. Your health will change. Your priorities will change. You’ll change.
Most of us are poor at predicting how much we’ll change in the future. This adds a layer of complexity to planning for what your financial future might look like 10, 20, or 30 years from now.
It’s even more difficult to imagine how the world around you will change. New technologies and new opportunities that you can’t even imagine today will come to fruition.
Research in human psychology details that most people underestimate how much their goals, desires, and even personalities will change over time.
From a practical perspective, we recommend clients avoid the financial planning extremes. An extreme focus on a single aspect of wealth that’s top of mind today, can be detrimental to your overall long-term financial well-being.
The decisions you make today will directly influence your life in the future. Looking back, you may not always be happy with your previous decisions, but these choices were made at a different time and in a different context.
As financial planners we want clients to have the ability to course correct when needed. You’ll change and it’s best to accept change as a necessary condition, rather than an obstacle, to long-term planning.
On an even more fundamental level, you can simply change your mind about what’s important in your life. Being able to accept the reality of sometimes changing your mind helps you move on to the next phase of your life. Of course, you have to be willing to ignore “sunk costs” and focus on future actions instead of things in the past.
The main function of personal financial planning is to encourage, nudge, and cajole you into taking action steps toward your most important goals. Yes, those goals will change from time to time, but positive action is better than being mired in the status quo.
Your financial future hinges upon ultimate outcomes rather than initial outcomes. After all, you’ll probably need more money for a longer period of time than you may think. I call this “longevity reality” since it’s different and longer than life expectancy. Exactly how long you’ll live is uncertain; investment returns are uncertain; your future goals are uncertain. Change is the common denominator.
Approach financial decisions with the understanding that you’re making choices based on who you are today and with the knowledge that what you want in the future will change.