What The Wealth Retirement Podcast

Building Bridges to Your Future: Psychology Meets Personal Finance

• Jonathan Bednar II, CFP • Season 1 • Episode 85

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Have you ever felt like your future self is a stranger? Or that some future goals are a bit too far away to understand? That's because, scientifically, our brains struggle to connect with the future version of us. Join me as I unpack some fascinating research from UCLA's professor Hal Hershfield, and unravel the implications it has on our ability to pursue long-term goals.

You can find show notes and more information by clicking here:  https://bit.ly/3r60Y3V

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Thanks for Listening!

Jonathan

Speaker 1:

Welcome to What the Wealth? a financial planning and investment podcast for professionals and families to help you navigate life's financial transitions. Jonathan's mission is to facilitate the ability for you to plan for and create the life you love, free from anxiety about money. And now here's your host, certified financial planner, jonathan Bender.

Speaker 2:

I hope you all had a wonderful 4th of July holiday. My name is Jonathan Bender, certified financial planner, co-owner of Paradigm Wealth Partners in Knoxville, tennessee, and host of This What the Wealth Podcast. Today I want to talk to you a few minutes about your future self. I recently was able to attend a work conference out in California at the UCLA Anderson School of Management with some colleagues about 125 fellow colleagues and some professors at the University of California, los Angeles. So really great experience. I've never been to UCLA, so had a great time kind of walking around campus a beautiful campus, the weather was fantastic and got to really kind of aside from the work part of it, one of my favorite parts that I really enjoyed the most was the UCLA Hall of Fame and athletic Hall of Fame, and so I was able to kind of tour in there and see a lot of their history and championship trophies and then you know important people in their program And it was really it was just a really, really cool experience. Jackie Robinson's jerseys were there. You know the all of the nostalgia from the college championships and their story program was there. So it was really just a really cool experience to see and kind of I was actually the only one in there, it was right before closed. So it was really a cool experience to see kind of by myself in there and just kind of soak in the story program that is UCLA. So what I want to talk about was actually in the opening remarks from the conference.

Speaker 2:

It was a two-day conference kind of, co-hosted by executive leaders at LPL Financial and co-hosted by one of the professors at UCLA, hal Hirschfeld, who is a kind of talks to introduces himself as an expert in the field of kind of where the field of psychology or behavior, of science and economics overlaps. We had a lot of conversations around future self and he actually has a new book about this that came out and I'll make sure to link that in the show notes if you're interested in this book. But the idea was around and they have some experiments to kind of back this up. But the idea is around your future self and it's really hard to relate to our future self person. We almost view that person 10, 15, 20, 30 years down the road as a totally separate person And I think that's one of the reasons why it's so hard to pursue long term goals is because it's so distant in the future.

Speaker 2:

It's so far away. We don't know what the world is going to look like, what our personal lives are going to look like, what if we're still going to think the same, if we're still going to have the same beliefs or core values, or if we're still going to have the same goals or aspirations. And so defining and trying to really understand our future self and the goals for our future self becomes really difficult. And they had some experiments that kind of backed this up where they were doing in a lab they were asking some questions and they were taking a reading on identifying some of your current thoughts, your current traits, your current beliefs or goals and what those might be, and then they identified those in a different way around your future. And what the study shows is that about two seconds into the experiment your brain goes and it clicks on and has a hard time really positioning the thought for what does the future look like? I mean, you can kind of tell there's a few seconds there, like two seconds to five or six seconds, where you see a big difference between long term thinking and short term thinking, and then you quickly come back to thinking about short term And I think it again goes back to personal finance and investments and retirements and personal financial goals and dreams and objectives and all of that.

Speaker 2:

And I think the work that Hal has done and that kind of two hour lecture that we heard on future self really made things a lot clearer on why I think it's so hard for any of us to really pursue those long term dreams. And it's because, again, we almost view our future self as so far down the road that it's almost a different person. We don't even know how to really harness the power of that thinking in our mind to align current self versus future self. And that's why so many people focus on short term goals, short term dreams. It's easier to think about the here and now, on the flip side, what they talked about, and I think this is true for a lot of things and we know this to be true but it is something that we often don't put enough thought into and we almost take it for granted And that is if we know the success for being a long term investor or long term pursuing your long term goals and dreams is in the short term. And we also know by how Hirschfield's research, that it's really really, really hard to identify with our future self, and we know that it's much easier to identify with our current self than the trade off should be short term actions to kind of create the behavior to then pursue what you want your long-term self to be.

Speaker 2:

So let me break that down in maybe a slightly different way. A lot of times we think about even short-term I want to lose weight in the next six months. I want to save, you know, a thousand dollar emergency fund by the end of the next two months, i want to get a new car, whatever those short-term goals are, but they're still, you know, two months, six months a year, two years down the road, and what Hal's talking about is just do the next thing. So instead of you know what do I need to do to lose weight for the next six months, and instead of spending so much time worried about what's the nutrition plan, what's the workout scheme, and you get all these plans in place that you can't really take any action, the challenge would be just do one push-up, just do five push-ups, just do something so that you get the sense of accomplishment. And I think that that's really important because it also kind of gets you started, it kind of reinforces. Okay, we can do this. This is just the next thing we need to do.

Speaker 2:

The study went on to say you know, how do you incentivize long-term benefits? that again, it's hard to really grasp what those will be because we don't understand fully or identify with fully our future self. So how do we take those long-term objectives and pursue those and kind of give up? not give up, but relinquish some of the short-term? So I guess the other, the best way to say this, is how do you get your mind and your actions to take to forego shorter-term benefits or gains to pursue those longer-term?

Speaker 2:

And one of the examples they used was again, like back to the weight or the exercise thing If you could only watch a show, but to watch the show you had to be in on the peloton or you had to be in the gym. We saw, the study showed that exercise increased. Or if you, if you could only use your phone at night. Or one way to maybe block your phone at night, not watch your phone at four bed is to lock it in the gym and then the next morning when you wake up you can't look at your phone first thing and the and your phone is in the gym. Now you're kind of creating these forcing mechanisms that kind of prevent you from doing the things that may be short-term, feel good watching your phone at night, binge watching a show, scrolling through, you know, social feeds and the flip side. Longer term now, this is longer term in minutes, not years. You know you're not watching the short-term social media or binge watching shows or whatever. And the longer term in this situation is delaying that gratification until the next day when you would wake up, go to the gym, do your exercise routine and you're creating these small building blocks, these small habits.

Speaker 2:

And so I just really found that the lectures insightful. I thought that how had a lot of information on. You know, how do we, how do we start to think about identifying with our future self, so that we are creating and reinforcing our habits and in our life in a way that you know we want to have in the future? so I just thought I would kind of share that. I thought it's appropriate because, again, i think that's where a lot of the struggles are with personal finances and investing in retirement. Some of the stuff is so far down the road that it's hard to kind of grasp what that even looks like, so just want to kind of again share some of that hope. You all have a wonderful weekend and we'll see you on the next show because in your retirement, have a wonderful day thank you for joining us on what the wealth.

Speaker 1:

For more information, get in touch with Jonathan at whatthewealthcom. Remember to subscribe to the podcast so you don't miss any information that can help you create the life you love. The information of this podcast is educational and general in nature and does not take into consideration the listeners personal circumstances. Therefore, it is not intended to be a substitute for specific, individualized financial, legal or tax advice. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a final decision. Securities offered through LPL financial member. Finra, sipc. Investment advice offered through paradigm wealth partners, a registered investment advisor and separate entity from LPL financial.