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unfollowing anyone who makes you feel irrationally jealous, and start following some reputable personal finance experts who share content that supports your goals.


Hyperbolic discounting (a.k.a. myopic bias, short-term bias, present bias) Our brains are wired to favour the present — which means we prefer to get something today over an even greater something tomorrow. Similarly, future costs aren’t felt as deeply as today’s costs. “This is not a bad thing on its own, but we tend to over- discount the future,” says Decker. For example, he cites research on conference participants


who were asked to choose a snack: fruit or chocolate. When making the choice a week in advance, most (74%) chose fruit. But when selecting the snack for that day, 70% went for the chocolate. “When our current self doesn’t have to bear the cost, we make the smarter/healthier decision,” he says. (The cost in this case, of course, is forgoing the delectable chocolate.) “When we’re asked to bear that cost today, we’re less likely to do it. And this shows up throughout your life — as kids, young adults, etc.” Thaler’s groundbreaking Save More Tomorrow (SMarT) program capitalized on this bias by having people make a


commitment in the present to increase their savings rates in the future, when their salaries increased. The result? Aſter almost three and a half years and four annual raises, average savings rates for SMarT program participants nearly quadrupled, to 13.6% from 3.5%.


How to make it work for you As Thaler illustrated, creating shorter-term deadlines for longer- term goals is one way to get around present bias. “Take advan- tage of this attachment to money in the present and set up [savings/retirement plans] that automatically increase your con- tributions in the future,” says Kramer. Another tactic is to try to better connect the concept of


future self to current self, instead of viewing your aged counter- part as some alien third party. “We don’t feel close to our future self in retirement. So researchers speculated if we draw closer ties [to our future self] we might save more,” says Kramer. They were right on the money. People who were shown an age-pro- gressed photo of themselves socked away more than twice as much for retirement as those who saw only a current undoc- tored photo.


TAMAR SATOV is a freelance writer in Toronto


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