Money and the psychology of time
I recently watched a video on TED that interested me the most. It talks about a concept that we can use to change our lives just by altering our perception of it.
This is about the psychology of time.
According to TED speaker and psychologist Philip Zimbardo, people have generally 3 orientations toward time: past-focus, present-focus, and future-focus.
Past-focus looks into “what was;” present-focus looks into the “now” or your passion for the moment; while future-focus looks into cost-benefits and “what will be.” The marshmallow test perhaps best highlights the difference between being present-focused and future-focused.
And such also holds true in personal finance: we also have past, present, and future orientations interplaying within us.
But the main issue, the speaker said, is that people tend to have biases in time perspectives – they learn to overuse and underuse others.
For example, some people focus more on the past; they dwell and get stuck in it. Others focus more on the present – enjoying the pleasures of life without any thought of future consequences at all. And there are those who focus more on the future that they fail to enjoy life’s simple pleasures today.
The key then is to have a healthy balance of the 3: a deep orientation on the good things of the past, a moderately deep orientation on the future that gives us a healthy aspiration, and, a moderate orientation toward the present to enjoy life as well.
Imagine if we are just focused on the past: losses will make us averse toward investing or persevering in business, which translates to opportunity lost. Moreover, we can remain prisoners of unhealthy money behaviors (like overcompensating for relative depravity, or hoarding) as a result of our family or social environment.
Or we can be present-oriented hedonists: enjoying only the present; spending all our hard-earned money (others go into debt) that we utterly disregard not only our own future but our family's as well.
Or we can be so future-oriented that we scrimp on our own selves when in fact we can afford better.
True, we all have past experiences that have influenced our money behaviors. We all have present needs and wants that have to be satisfied, and we have a future to build as well.
That is why balance is the key.
We should build on positive behavior about money. If there are any negatives, being conscious about them is already a positive thing, and working on them gives us freedom to start anew.
Enjoying the present means allocating reasonable budgets for vacations and other wants. Building for the future means planning and setting aside for our children’s education and our own retirement as well.
Of course, clashes of these 3 are inevitable; the tugs-of-war that we experience daily.
This is where priorities come into play. Ask yourself: when I spend this way, what does this say about my money priority? Who or what do I really prioritize? What is really important to me?
Then, let your budgeting and spending reflect your priorities in life. As one author said, “We learn from the past to understand the present and build the future.”
Photo of a man linking gears of time and money via Shutterstock
Photo of time is money via Shutterstock