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Have you ever found yourself justifying a splurge by mumbling, “Future me can deal with it”? Or saying, “Retirement? That’s like... forever away.” Congratulations, you’re human. Specifically, you are engaging in a little cognitive glitch called temporal discounting—the human tendency to undervalue future financial rewards in favor of instant gratification. It’s the same reason you might be tempted to gobble down an entire pizza now and worry about the consequences (and the heartburn) later. The trouble is, while ignoring the vegetables on your plate today might only cost you some indigestion, undervaluing your financial future can snowball into real, tangible money problems.
At its core, temporal discounting is when we perceive $100 today as more valuable than $150 a year from now. Even if you’re not a gambler, many of us make financial decisions that are shockingly short-sighted, like raiding our savings for yet another new gadget or splurging on avocado toast like it’s a dietary requirement. If you’ve ever chosen the new iPhone over putting money into a retirement account, you’ve already fallen victim to this quirk of human psychology. And you’re in good company—virtually all of us are wired this way to some degree.
The reason behind this tendency is rooted in both evolution and brain chemistry. Our ancestors were wired to prioritize immediate rewards because, well, their lives were about survival in the moment. They weren’t stockpiling woolly mammoth steaks for their 401(k)—they were focused on not getting eaten by a saber-toothed tiger before dinner. Fast forward thousands of years and that same survival instinct has been hijacked by modern conveniences. The thrill of a quick dopamine hit from an online shopping spree or a splurge-y dinner out is enough to override our logical, long-term planner brain (which, let’s face it, is often the financial equivalent of the quiet kid in the back of the classroom).
Psychologists have studied this phenomenon extensively and found that temporal discounting is particularly problematic in the realm of personal finance. When we undervalue future rewards, we’re more likely to under-save for retirement, rack up debt, and live paycheck to paycheck—even when we “know better.” It’s why so many New Year’s resolutions to finally max out a 401(k) or build an emergency fund melt away by February when we’re lured by flash sales and DoorDash cravings.
But don’t despair. You’re not doomed to be financially nearsighted forever. With a bit of strategy and self-awareness, you can train your brain to give future-you the respect (and bank account) they deserve. The first step is recognizing when this mental trap shows up in your decision-making. Every time you think, “It’s only $20, I’ll catch up next month,” you’re playing into this pattern. Instead, try reframing these moments by vividly imagining your future self. Picture yourself 10, 20, or 30 years from now. Are they retired comfortably on a beach or still hunched over a laptop in a dimly lit office trying to pay off lingering credit card debt? Giving a clear identity to your future self helps bridge the psychological gap between now and later.
Researchers from UCLA even found that when people were shown digitally aged photos of themselves, they increased their retirement contributions. Basically, nothing snaps you into long-term thinking faster than realizing one day you will be a silver-haired legend—or a silver-haired person still eating instant noodles because you undervalued your financial future. You can try this trick yourself with free tools like FaceApp or similar apps to "meet" your older self and give them a pep talk.
One helpful hack is to make your future rewards feel as immediate as your temptations. Instead of viewing your 401(k) as a mysterious black hole, start assigning concrete goals to it. Are you saving for a dream home? A trip to Italy where you can finally eat pasta in a way that would make your carb-hating trainer cry? A cushy retirement where you can say, “I’m done” before you turn 60? Anchoring your savings to something tangible makes the future feel less foggy and more motivational.
Another powerful approach is automating your good decisions. Our willpower is like an old smartphone battery—it drains quickly and often leaves us stranded. Setting up automatic transfers to your savings or retirement accounts removes the need to constantly battle temptation. It’s like financially tricking yourself in the best way possible. Out of sight, out of splurge.
Behavioral economists also recommend “pre-committing” to your goals by creating rules you can't easily break. For example, you could promise yourself that every time you get a bonus, half goes directly to investments before you can touch it. Or you might sign up for an app that locks away your savings and penalizes early withdrawals. It’s like putting your money in financial time-out where it can’t wreak havoc on your plans.
Interestingly, stress and fatigue are two of the biggest culprits when it comes to poor future-oriented thinking. Ever notice how you’re more likely to blow your budget when you’re tired, hungry, or emotionally drained? That’s because your prefrontal cortex, the part of your brain responsible for long-term planning, gets hijacked when you’re running on empty. To combat this, make important financial decisions when you’re well-rested, fed, and not binge-watching late-night infomercials. A little self-care goes a long way toward making smarter money moves.
Another sneaky trick to improve your future-oriented thinking is to make your future feel closer. Instead of thinking in terms of “30 years from now,” try breaking down your long-term goals into smaller, more immediate steps. Rather than saying, “I need to save $500,000 for retirement,” think, “I need to save $50 this week.” This makes the task more approachable and less likely to trigger that primal urge to spend now and deal with the consequences later.
You can also flip the script by focusing on the cost of inaction. For instance, instead of thinking, “I’ll start saving for retirement next year,” consider how much that delay might actually cost you in lost compound interest. Spoiler alert: It’s usually more than enough to make you clutch your wallet and reconsider that third streaming service subscription. Compound interest is often referred to as the eighth wonder of the world, and for good reason. A dollar invested today has the magical ability to multiply over time, while a dollar spent today vanishes like your motivation to work out on a Monday.
For those wanting a deeper dive into the psychology of this, check out the work of behavioral economist Dan Ariely. His book, “Predictably Irrational,” is a fantastic (and funny) look at how and why we make irrational financial decisions, and how we can outsmart our own brains. You can find it here: https://www.amazon.com/Predictably-Irrational-Revised-Expanded-Decisions/dp/0061353248 (A must-read if you want to stop making money mistakes you don’t even realize you’re making).
Another helpful resource is this article from the American Psychological Association on why we procrastinate, which often ties into why we undervalue future rewards: https://www.apa.org/news/press/releases/stress/2023/procrastination-health.
And if you’d like to play around with interactive tools, NerdWallet offers this compound interest calculator to help you see exactly how much your future-self could gain from your better choices today: https://www.nerdwallet.com/banking/calculators/compound-interest-calculator.
Ultimately, improving your future-oriented thinking isn’t about never spending money today. We all need the occasional treat or that one purchase that brings genuine joy. But shifting your mindset so that you weigh those choices against what they cost future-you is where the real magic happens. You can still have fun today—you just don’t have to finance it at the expense of your tomorrow.
So next time you’re tempted to blow your paycheck on something shiny and impulsive, pause and picture yourself sitting under a palm tree in retirement, sipping something cold, knowing you made smart choices early on. Or, at the very least, imagine your future self yelling at your present self through the space-time continuum, holding a stack of unpaid bills.
Your wallet—and your future self—will thank you.
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