“To abstain from the enjoyment which is in our power, or to seek distant rather than immediate results, are among the most painful exertions of the human will.” – Nassau Williams Senior

 

Sometimes great life lessons can be taught by something wholly quotidian – like a marshmallow. In 1972, Stanford psychologist Walter Mischel set out, marshmallows in hand, to test the resolve of a group of children. Each child was offered a single marshmallow; but if they could delay the gratification of getting the treat immediately, they were promised two at a later time.

Of the 4-year-olds tested, 70% couldn’t wait and a mere 30% showed enough self-restraint to earn the coveted second confection. Interestingly, the experiment has been replicated all over the world and consistently, two-thirds of those tested cannot wait and one-third can.

More fascinating still is the far-reaching impact of the ability to consider future happiness. At a 15-year follow up, researchers found that those kids who waited are more successful in a number of facets, including academic and personal achievements. 

In an eerie real-life parallel to the marshmallow studies, the McKinsey Global Institute predicts that two out of three Baby Boomers will not be able to meet their retirement needs. In marshmallows as in life, good things come to those who can wait.

Every day, beneath your awareness, a battle is raging; a battle between your present and future selves. Your present self wants the donut but your future self implores you to eat the celery. Your present self wants to date the “bad boy” but your future self begs you to seek out that studious guy in the front of the class. The “right now” you wants to blow your whole bonus check on something fun, but a rational future voice opines that you should put at least some of it away. It’s a battle alright, but a lopsided one in which the future you is often left defenseless.

Consider the behavior of those joining a health club, who tend to choose a monthly subscription rate rather than the pay-as-you-go option. In the moment, they feel resolved and as though they’ll spend every waking moment in the gym. The reality is, it costs 70% more on average to choose the subscription model since attendance tends to peter out greatly over time. Likewise, you may fill your bookshelves with thick leather volumes of classic works, but find that when the times to read, you fall back on the latest Tom Clancy novel. Sure you mean well, but the chasm between your current and forecasted self remains gaping.

While it is hard on a good day to close this divide, it seems as though we are at a period of particular neglect of our future selves. Dan Goldstein, a behavioral finance expert, reports that the savings rate has been declining since the 1950’s and is currently hovering just barely north of zero.
 

Planning for the future today isn’t easy, but here are a few tips to get you started:

Make it Real – One of the reasons that the present self tends to win out is that pain and pleasure are felt in the present. You can make your goals more real by putting in place some sort of commitment device that rewards (or punishes) your present self for taking good care of your future self.

For instance, set a savings goal as well as a reward and punishment that accompany it. If you are able to save $xyz, allow yourself a day off, a coveted watch or a trip to the movies (whatever motivates you). If you are unsuccessful, attach a consequence that is sufficiently painful to encourage better behavior next time around. By bringing the “then and there” into the “here and now”, you greatly increase your odds of success.

Make it Now – There is a fascinating study on language that underscores the power of thinking in the now. Linguists divide languages into two camps – those with strong and weak “future time reference” (FTR). Strong FTR languages like English allow you to couch an action in the future (e.g., “I’m going to save money”) whereas weak FTR languages like Mandarin might phrase a similar sentiment more urgently as “I save money.” Research on these linguistic differences shows that weak FTR speakers are 24% less likely to smoke and more likely to exercise by a whopping 29%.  Although the results are preliminary, it seems intuitive that couching your actions in the now can have a positive impact on how likely you are to move out.

Make it You – Our realization that a future self is real tends to lack some vividness and emotional connectivity.  Sure, we understand intellectually that we are going to get older one day, but that realization lacks the resonance that would cause us to act accordingly. Drive home the fact that YOU, not some abstraction, are the one that will be aging and have very real financial needs. You might do this by having in-depth conversations about your future plans, visiting with older relatives, or consulting with a mentor about their process for retirement planning and saving. Whatever it takes, move this conversation from the hypothetical to the applied as quickly as possible.
 

Dr. Daniel Crosby is a behavioral finance expert who works with organizations to develop products and messaging to maximize positive investment outcomes. Among his current collaborations is "Personal Benchmark", a system of embedded behavioral finance delivered by Brinker Capital. The title South Gotham is meant to evoke both the foolish side of NYC's financial arena, as well as Crosby's native Atlanta.