“Long-term planning is harder than it seems because people’s goals and desires change over time.”
“An underpinning of psychology is that people are poor forecasters of their future selves. Imagining a goal is easy and fun. Imagining a goal in the context of the real-life stresses that grow with competitive pursuits is something entirely different. This has a big impact on our ability to plan for future financial goals.”
“We should avoid the extreme ends of financial planning. Assuming you’ll be happy with a very low income, or choosing to work endless hours in pursuit of a high one, increases the odds that you’ll one day find yourself at a point of regret.”
You should plan such that your basic needs are covered as you grow old to lead a comfortable life. Your goal could be ‘I want to become rich’, but achieving certain emotional satisfaction is a better goalpost.
The Monk who sold his Ferrari is a great example of how one’s perception of wealth changes as one grows as an individual. You never know, maybe 10 years down the line, you may become a monk too!
Read the next lesson: Different people have different financial needs
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