Balancing Short-Term and Long-Term Thinking–Part I

by Stephen Mills on February 13, 2011

Should you save your money for retirement or spend it now?  Should you enjoy those sugary deserts today or should you forgo them so you will be healthier in your old age?  Should you work in a secure high-paying job you don’t like or be a starving artist at something you love?  These kinds of questions have no simple answer; they are different for everyone.  But even beyond that I submit it is next to impossible to even know the best answers for yourself.  The reason is that the time spans involved are simply too long, life is too unpredictable, and the the world is changing at a rapidly accelerating pace.

I’m sure that when you are suffering the consequences of diabetes when you are 75 you will wish you hadn’t indulged so much when you were 40.  Likewise when you are poor at 80 you are going to wish you saved more when you were 30.  But that doesn’t necessarily mean those would have been the “right” decisions.  Once you are no longer enjoying the short-term benefits and instead are suffering the long-term consequences you are going to look at the situation differently.  Who’s to say whether 30 years of eating pleasure and 15 years of poor health in old age is the wrong  balance?  Does the pleasure of smoking for 50 years make up for the lung cancer at 66?   Most people would say no but they are looking at it from the perspective of the 66 year old.  These are difficult questions even though I’m sure many of you think you know the answers.

I could save for a comfortable retirement and have it all wiped out in a currency crises (a likely possibility).  What if the people who didn’t save for retirement vote to take all the money away from the people who did and use it for the “greater good of all” (another likely possibility)?  I could eat an extremely strict diet and be wiped out by a bus when I’m 50.  That would really suck.  What if there is a pill in 30 years to fix all those health problems?

To say “balance” is the right answer is to say very little.  That’s the whole question – how exactly should I balance these competing goals?    How do we know?  Are there any useful guidelines?  Is there anyway to work it so you get both short-term and long-term pleasure?  There is no easy answer to all these questions but I’ll try to provide some some thoughts that I think may help.

I’ve decided to break this article up into multiple parts to keep it from being extremely long.  Tomorrow I’ll provide some ideas and work through a scenario in the area of health that will help clarify my suggestions.


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{ 4 comments… read them below or add one }

Rnjoans February 15, 2011 at 7:51 am

Love this ! Cannot wait to learn more! When is the next part going to be posted?


John D. Buerger, CFP® February 19, 2011 at 10:53 am

Stephen – This is further complicated by the fact that our brains are very immediacy-driven. Pleasure in the future is discounted by about 50% compared to pleasure in the moment. If that future pleasure is being “paid for” by pain in the present (example -not spending money today so you can have it for retirement), the future benefit has to be twice as large as the present pain in order for your brain to view it as net gain … which is why we have such a low savings rate in this country.
John D. Buerger, CFP®´s last blog post ..Living An Inspiring Life


Offbooze February 20, 2011 at 12:07 am

Not to mention that we’re constantly negotiating the impact of long term and short term decisions made yesterday and yesteryear.


Marty February 20, 2011 at 6:01 am

Some very challenging and thought provoking questions here.
A friend of mine a few years ago had a heart attach at age 40. Chatting with him in hospital, he told me about a conversation he had with one of the nurses. He was told “We have had them all in here; non drinkers, non smokers, vegetarians, vegans, fitness freaks…… yes, they’ve all died in here”.
Living a healthy lifestyle helps, but when your time is up, that’s it I guess.
I’ve chosen to live day by day mainly and not concentrated on saving for the future. My father is the opposite. Whist he is comfortable now in his 80’s, he was really upset how much it cost him in caring for my mother through her long illness until she died last year. He said he wished he’d spent more during the times of health. He could then have been able to get the assistance from the state that he is entitled to having worked all his life and paid national insurance.
Marty´s last blog post ..Letting go your Outcomes – The pinball effect


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