How time travel can improve your finances and your life

28 Nov 2014

By Shadforth Financial Group

Often the media would have us believe that investment success relies on us picking the right investment or backing the right fund manager. They describe investing as if it were roulette. Place your bets and see how you go. Make it big, or get wiped out. But investing isn't like that at all. Investing is much more like farming, where diligent planning, regular maintenance and good management produce a solid return over a period of years.

Along the way there are good years and bad years as factors outside the farmers control, such as weather and market prices have an impact. But overtime, with diversified crops and good land use practices, a viable, sustainable and valuable asset is grown. Think about building wealth like personal fitness or weight loss. Getting fit is a matter of eating in moderation and ensuring a sufficient level of activity so that kilojoules burnt are equal to or greater than kilojoules consumed. Building wealth is very much the same.

Did you know, for example, that the number one determinant of wealth, for those who haven't inherited it, is simply our ability to spend less than we earn. It's simple maths at the end of the day. Yet most of the commentators and prognosticators tell us that the most important aspect is the earnings we have enjoyed in the last 30, 60 or 90 days on our portfolio.

The problem for us humans is that we are, by nature, relatively fixated on the short-term, the here and now and relatively blasé about the long-term. Do we have the extra slice of chocolate cake today or not? Do we save that windfall or do we use it to buy a new flat screen TV?

It is this tendency to over-weight our short-term desires and under-weight our long-term goals that leads to much regret later in life. This is not to say that we shouldn't seek to enjoy ourselves along the way — clearly we should. But this short-term enjoyment shouldn't be at the expense of our long-term objectives. After all they are our long-term objectives — it's just that they're over the horizon, out of reach and, largely, out-of-mind.

A mental trick I have often used and seen others use is virtual time-travel. Deliberately and consciously considering the future-you — the you in 2, 5 or even 10 years' time. Consider exactly what future-you want. How does future-you want to live in look like? Where does future-you want to live? What financial position would future-you like to be in?

Once you have a clear picture of the life future-you is aiming for, you can begin to consider what current-you needs to do to make this future a reality. For some this approach will come easily. For others it will feel awkward and you may be tempted to overlook these ideas before really giving them a try. Consider this, ask yourself today, what you really wish you had done differently in the last several years.

Wouldn't it have been great, for example, if you had…

  • started that exercise regimen 12-months ago, or
  • returned to University to begin that post-graduate study you've been considering for years, or
  • increased the repayments on your mortgage last time you had a salary increase.

Unfortunately for as long as time-travel remains a possibility only in the world of fiction you won't be able to change the past, but you can use your deliberations about the past to help you make better decisions about your future today.

Consider what the you-in-5-years would really like the current-you to start work on today. You could start learning the guitar? Take the kids on that overseas holiday before they get any older? Get serious about saving for your future?

Once you get into this habit, it will become easier and easier. You can begin to prioritise your goals and your plans. Whilst most of us will never be in a position to have everything we want now or in the future, if we take the time to prioritise, we can ensure that we can have the things we want most. To be debt-free. To build a substantial retirement nest-egg. To fund overseas travel without needing to touch the credit card. To ensure our parents are cared for in their later-years. To fund our children's education or get them started in the housing market. These goals require planning, preparation and dedication. But simple action every day, week and month can make them all attainable.

You may also find it useful to discuss these plans and the actions you will need to take with someone you can trust. It may even be helpful to seek some professional assistance to ensure the action plan you put in place will see you firmly on the right track to achieve the longer term goals you are aiming for.

Whenever you're tempted to change course and to focus too much on the here and now, close your eyes for a moment and take a quick trip to the future and ask "what would future-you like me to do today?"

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