Nearly half of Americans have no retirement accounts, guaranteeing a financially stressful future. At the same time, the average household has 22 entertainment devices and most spend extra for yearly vacation trips. People are bankrupting their future with reckless extravagance. What’s that about? Read on for more, or download the full article: Two Retirement Killer Biases & What to do About It
Two Retirement Killer Biases: Forecasting Error & Comfort Drive
Forecasting Error is the psychology term for our inability to envision the future. Comfort Drive is our instinct for immediate satisfaction. Put these two together and the statistics make perfect sense. Entertainment now feels more pressing than distant future needs. The annual holiday struggle to maintain good habits is a perfect example. Each December we know January is only weeks away, but we still struggle to stay disciplined. Multiply that by decades, and you have the picture.
To read more download: Two Retirement Killer Biases & What to do About It
3 Steps to Help Clients
Step 1: Make the Future Emotionally Vivid
People can’t feel their future experience, so there is no motivation to resist today’s temptation. The way to feel the future is to craft a concrete vision. Charts and graphs won’t cut it. People are emotionally motivated by experiences. Help clients envision living an impoverished future. They need to feel the pain of tomorrow, today. That shifts their mindset.
Step 2: Make a Plan for Pleasure Today and Tomorrow
Once they’re jolted awake, help clients craft a reasonable plan to enjoy pleasures today and pleasures in the future. Like starvation dieting rarely works, an overly restrictive budget will be quickly abandoned. Have them imagine banking future pleasure with a reasonable plan.
Step 3: Create Positive Accountability
All people benefit from positive accountability. If you’re willing, check on the client’s financial action plan. Build in as much support as possible, within your service and fee structure.
To read the full article with more practical tips download Two Retirement Killer Biases & What to do About It
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