Everybody has dreams, aspirations and long-term goals. However, in the short term, you have to take the required action to accomplish them; if not, they may be near impossible to bring to fruition.
The inability to take action can affect all aspects of life, especially your financial wellbeing. It can be difficult for people to reconcile saving now, foregoing luxuries, when they’ll only see rewards far in the future.
Are you an employer? A great way to help your employees save for the future is to invest in an umbrella fund, which is a retirement fund for your staff that can also include insured benefits for death and disability. It is also more cost effective than a stand-alone fund for both employer and employee.
Contemplating the future
Interestingly, many people seem, despite the current economic situation, to be buying expensive items that aren’t really needed, such as a new vehicle.
Save or spend? We think about it on a daily basis; a constant battle between rational practicality and instant gratification – many people succumb to the latter and spend today, without thinking about tomorrow.
In an endeavour to quantify whether this is a personality trait, behavioural psychologists have developed a scale called Consideration of Future Consequence (abbreviated to CFC.)
This scale measures the influence of imagined outcomes. Their findings suggest that people who have a high CFC score tend to focus on the long-term consequences of their behaviour instead of their short-term needs. Conversely, a low score indicates a tendency to think about the present (short term), regardless of the impact it might have on the future (long term.)
High scorers protect their long-term wellbeing. They are more likely to save than spend.
Can our behaviour be changed?
While saving for the future is important, by finding a balance, we can also live for today. You can look for an exciting short-term incentive that will motivate you to take action towards receiving a greater reward in the future. Ask yourself these questions:
- What are the long-term goals I want to achieve?
- What actions do I need to take to achieve these goals?
- Must I perform these actions on a regular basis despite possible discomfort?
- What kind of substitutes can I use as immediate rewards to motivate me Instead of focusing on a reward in the distant future?
We are habitually motivated by short-term rewards; make use of these rewards which can help distract you from the short-term sacrifices you may need to make for your future financial wellbeing.
For example, consider holding off on buying that new car and rather invest the money in unit trusts. Find smaller rewards that don’t negatively affect your finances.
Smaller short-term rewards can help you to make calculated choices based on logic, allowing you to live the life to which you aspire, now, tomorrow and in the future.
If this seems like an overwhelming task and you are unsure how to begin planning for the future effectively, speak to an independent financial advisor (IFA). He/she will use his/her experience and knowledge to assist you in drawing up a realistic plan based on your financial objectives.