Why save for retirement – Part 1. Visualising your future self
Prepared by Allan Gray Namibia.
Is your future a priority?
Between bond or rent, car repayments, schooling and day-to-day survival, there are so many things competing for a piece of the salary pie it’s no wonder that saving for retirement falls off the priority list. And once we are done with the monthly expenses, the needs and wants of our current selves take priority over our future selves. We are victims of our instant gratification culture. The reality is that very few Namibians will be financially independent when they retire and may have to depend on family or the state pension.
Put yourself in the shoes of your future self:
We tend to invest in our bodies and minds, following health and wellness advice, without appreciating the importance of directing some of this spend towards saving. Consider yourself in the future: older, but grateful that you exercised regularly and drank plenty of water and thankful that you took calcium to strengthen your bones and used lotions and potions to slow the ageing process. Imagine how grateful you will be if there is enough cash in your bank account to allow you to maintain your current standard of living when you are too old to work.
It is hard for all of us to have empathy for our ageing selves, but this seems to be particularly challenging for Millennials (i.e. anyone born between 1980 and 2000). Goldman Sachs notes that tech-savvy Millennials are poised to reshape the global economy; they have a different set of priorities and expectations from previous generations. However, as many are encumbered with student debt, or still living with their parents and putting off marriage and parenthood, a distant goal like saving for retirement is very far off their radar.
If you fit into this age group it’s not all bad news: you are exercising more, eating smarter and smoking less. This is great – but makes it even more important to put saving on the radar as your healthy ways are likely to promote longevity, meaning you are likely to live longer and have more years to provide for yourself post-retirement. Saving feels like giving money to a stranger tomorrow, rather than spending on ourselves today. One of the key barriers to saving for retirement is that we find it very difficult to connect with our future selves on a personal level. Our behaviour reflects the fact that we see our future self as a stranger. Psychologists explain that, for people estranged from their future selves, saving is like a choice between spending money today or giving it to a stranger years from now.
How to empathise with your future self:
One study found that participants who were exposed to a vision of their future selves allocated more than twice as much money to their retirement savings. Visualisation is a simple technique used by numerous achievers – from sportsmen to politicians. Its proponents claim that by visualising an outcome we see the possibility of achieving it and are more motivated to pursue our goals.
Spend a few minutes trying to visualise what you will look like in the future, and the life you hope to be living, before you make financial decisions.
This article forms part of a series, where we’ll share tips and practical steps you can take for retirement planning in the following weeks to come.
© 2021 Allan Gray Namibia Proprietary Limited.