Zig Ziglar, famed salesman, author and motivational speaker passed away on Nov. 28. I came across a quote today which summed up successful financial planning in a single sentence:
“The chief cause of failure and unhappiness is trading what you want most for what you want right now.”
I might as well just take down my shingle and retire – because now the secret is out.
Successfully managing our personal finances is incredibly difficult. It asks us to focus on long term wants and needs when every bit of our human nature screams for us to give preference to that which we want right now. Good financial decision making seems to go against our very nature as human beings.
Think about it, what is your number one financial goal? Financial security for yourself and your children? A good education for your kids? To retire while you are still young enough to travel and enjoy life?
As a personal financial planner, I have this discussion about goals with all of my new clients. I can tell you that never once in my career has anyone told me that a new car, a Disney vacation, or the latest and coolest electronic gadget topped their list of financial goals. But these immediate desires seem to be so much more urgent, so compelling, that they are somehow, as if by magic, pushed to the top of our financial priority list. All too often families wind up trading away “that which they want most” (financial security, comfortable retirement) for an unending stream of “things they want right now”.
Clearly this in not rational behavior, so why do so many of us behave in this fashion? Behavioral economists use the term “temporal discounting” to reflect the human tendency to place a much higher value on the needs of the “immediate self” vis a vis the conflicting needs of the “future self”. A similar force is at work when it comes to dieting, exercise, and all manner of other behaviors which are good for us in the long term, but which don’t seem like much fun in the here and now.
One secret to successful financial planning (or dieting, or exercise…) is to somehow give the needs of the future self a greater priority. Saving for retirement is somewhat of a flavorless goal. So try to envision in detail what that future will be like. House at the lake? Travelling the world? Year round golf, tennis, or fishing? Specific goals can bring the retirement dreams of your “future self” to life, allowing those goals to compete more effectively with the wants of the “immediate self”.
Another approach is to keep the immediate self in a box. This is often done through budgeting. Living on a budget provides a restraint on the desires of the current self. In the process, we can make sure that our future self gets its proper share of the monthly paycheck.
A few other notable and witty quotes on life from the late Zig Ziglar that are worth a read can be found here: