❝The present moment is the only one over which we have dominion.❞ -Thich Nhat Hanh
It's 2003, and I'm in a finance class in college. Today we are learning about the power of compound interest. I've known about compound interest before but never really leaned into it like we're doing in class today. We learn about two different hypothetical investors. Amy starts investing $100 per month when she's 20 years old and stops saving when she is 30 years old. Bobby, on the other hand, wants to live his life in his twenties, so he doesn't invest anything until he's 30 years old, at which time he saves $100 per month all the way until retirement. By the time they retire, Amy has only put away $12,000, while Bobby saved $60,000. But, because Amy got a 10-year head start, she has almost twice as much money as Bobby.
Upon hearing this, I feel a lot of regrets. How stupid could I be? I started working when I was 14 years old. Most of the money I've made is gone, wasted on things that I don't even have anymore. I could have been investing for 10 years by now. I'm a fool.
Two years later, I am done with college and applying for jobs. The jobs I'm looking at come with salaries that are more than I've ever made before. Part of me feels successful in being able to make this kind of money. As I get closer to getting offers, though, I start to worry about how I'm supposed to handle this much money. I have a lot of debt from college, and I have an old car and college clothes. What are people at my new company going to think of me? Because I have so much debt, I can't buy new clothes and a new car. I feel really nervous about what other people - whom I've never met - will think of me.
I have direct experience with financial time travel. I was stuck in the past, wishing I would have done something differently and save more. I was stuck in the future, worried about what people would think about my financial situation and my financial decisions. In both cases, I clouded my mind with negative emotions and couldn't appreciate where I was. I couldn't appreciate the fact that I was in college learning the power of compound interest so that I could apply that going forward. I couldn't appreciate the fact that I was getting a job that came with the highest salary I've made at that point. My inner critic got the best of me.
Money is stressful, and it's made more stressful by our own minds. We, as humans, are constantly lost in thought. That means that we are talking to ourselves all the time, without knowing that we're talking to ourselves. Our heads are full of constant chatter throughout the day.
We inherited our genes from our ancestors. If you follow that chain far enough back, you'll find that our distant ancestors had to pay careful attention to the negative aspects of the world. As a result, our minds even today have a built-in negativity bias. We are wired to notice and pay attention to the negative aspects of our experience.
Since our constant chatter is primarily negative, people will refer to this as an inner critic. Your inner critic is the voice in your head that tells you you should be worried, afraid, and shameful.
If there was a person who followed you around and talked to you as much as you talk to yourself, you would hate that person. Yet we do it to ourselves all the time.
Financial Time Travel
Much of our constant chatter has to do with time travel. That is, we ruminate about things that have happened in the past. We fear things that may or may not happen in the future.
Money is the number one cause of stress and touches every area of our lives. Money seems to always be on our minds. So, much of our time travel is financial in nature.
Financial Time Travel: The Past
When we financially time travel into the past, we spend a lot of our energy thinking about things we would have done differently or things that we wish we did or didn't do. We feel bad about things we didn't do but could have.
This fills us up with negative emotions. We feel guilty about a purchase that we made or because we went on a shopping spree. We feel shame when we look back and believe that we aren't capable of handling money. We regret not saving sooner.
All of these negative thoughts get in the way of making clear financial decisions.
Financial Time Travel: The Future
When we financially time travel into the future, we spend a lot of our energy worrying about things that haven't happened yet. We're afraid of what will happen if we do or don't do something. We don't pursue opportunities because of the fear that they won't work out. We fear missing out on things if we save our money instead of spending it. We feel anxious if we believe we won't be able to pay our bills. We worry about what somebody's reaction will be to our decisions. Many of us default to catastrophic thinking, or believing the worst will happen.
Much like time traveling to the past, these negative emotions prevent us from making sound financial decisions for the future.