Do you put away more personal savings by focusing on the future or the present? It seems counterintuitive, but the answer, recent studies say, is the present.
Life is a beach. Do you ever notice how many books about personal savings show someone relaxing on the beach on its cover? The message is to visualize your future self, the one with tons of money in the bank, living the good life—- maxin' and relaxin'.
Researchers Leona Tam and Utpal Dholakia put popular financial advice, which focuses on the future, to the test in three studies they conducted related to cyclical vs. linear time orientation. They published their findings in January in Psychological Science. Their jargon-laden article is written for fellow academics, but I'll do my best to distill the findings into a simple, news-you-can-use takeaway.
First, what are linear and cyclical time orientations anyway?
Why? When we feel optimistic about our future — our earnings and our ability to save— we are more likely to defer putting money in the bank until a time when we feel in a better position to save.
So how do you adopt a cyclical time orientation, at least when it comes to savings? Well, here is a script Tam and Dholakia provided to the cyclical group in one of their studies:
The future will be exactly like the present: if you save money now, you will save in the next pay period. If you don’t save money during the present pay cycle, it is likely you won’t save money in the next cycle. We want you to focus on your personal savings in the present, and that is all. What’s more, at the end of the day, you will be able to look back and see how much personal savings you have achieved.
The bottom line: Be a financial pessimist. Look at your piggy bank as half empty. If you do, your future piggy may have a lot more to spend at the market instead of crying wee wee wee all the way home.