People, it seems, regard the present as a watershed moment at which they have finally become the person they will be for the rest of their lives.
Quoidbach, Gilbert, and Wilson (2013)
We make poor choices for our future selves.
We choose tattoos that we later remove.
We divorce those we marry.
We regret drinking so much, eating too much, and not exercising enough.
People believe that we have arrived at some final point, where we will not change much thereafter.
This despite the fact that we have changed a lot in the past 10 years.
How this affects your financial goals
When we make our financial goals, we make an assumption that we will be pretty much like how we are today.
Now imagine the person you were 10 years ago.
Was that person similar or different to your current self?
In 99% of cases, we will be quite dramatically different from our past self.
But the end of history illusion makes us believe that our present desires are a good indicator of our future needs.
This makes our usual long-term goal setting flawed as we fail to consider that our future self can, and probably will, have completely different preferences and desires.
Locking ourselves into bad choices
This has a big impact on the choices we make.
Some of the largest choices will have implications for the rest of our life.
Think of houses, cars, careers, and even marriage.
Locking ourselves into a specific housing choice with a large mortgage might lead to future unhappiness if our preferences change with time.
I might work in Tuas, and then based on that I move to the West.
If I change to a job in Pasir Ris, I am very adversely impacted.
I will change my preference to a location nearer the East.
But if I’m locked to living in the West, then it becomes a large drag on my happiness and well-being.
This also applies to being overly frugal or career focused.
By trying to save as much money as possible, or maximise our career, we might forego experiences that are irreplaceable, like time with our children or family.
These memories and experiences cannot be replaced with extra money or career progression.
But we might not realise that due to the end of history illusion.
We might imagine we want to advance or earn more, and that we will always feel like that.
This is probably not true.
How to avoid the end of history illusion
Remember that financial plans are not set in stone.
They are constantly reviewed.
They evolve as you evolve.
They change as you change.
Make sure you have the flexibility in your life to change with your preferences.
Your future self will thank you.
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