Thinking Ahead?

Photo by Ryan Berkovich on Unsplash

"When you think about your finances, how far into the future do you tend to think and plan? Days? Weeks? Months? Years? Decades? Generations?"

This is a question I often ask people during the prospective client process, as how someone answers is very helpful in understanding their financial approach.

There was a study from a few years ago conducted by Morningstar where the participants were asked the above question.

The really interesting result was that there was a clear, positive relationship between how far ahead someone thinks and their net worth. See the red line in this graph:

Translation: The further ahead someone thinks and plans, the higher their net worth tends to be.

(To be fair, I think there's both correlation and causation at play here.)

So ... how far ahead do you tend to think and plan?

According to this study, the longer it is, the better. 

For what it's worth, I think of this as part of my job as someone's financial planner.

Thinking ahead decades or generations doesn't come naturally, so part of my role is to be a forcing mechanism when it comes to this. The idea is that the more we make decisions together with a (very) long-term horizon, the more financially healthy you'll be.

If you’re interested in reading the full study, see this link: Morningstar study