Here’s Why a Long-Term Mindset Can Help You Live Wealthier and Healthier (and How To Build One)
How you answer these five questions might tell you a lot about your financial future
Most personal finance advice misses the crucial aspect of your mindset.
As an economist, I used to roll my eyes at the idea of cultivating a “money mindset”—whatever the hell that means. Money is about numbers, plain and simple. Make more than you spend, invest the rest in a diversified portfolio for the long run, and you’ll succeed.
I was trained to analyze data in spreadsheets, and when you bring a spreadsheet mentality to personal finance, it becomes exceedingly simple.
But financial decisions are not made by formulas in a spreadsheet—people make them. When people make decisions, you need to start thinking about what influences a person’s decision-making.
To be great with money, you need two things
The ability to make good decisions
Consistency in your decision-making over very long stretches of time
To accomplish these two things, you need to develop a long-term mindset.
This is the first in a six-part mini-series where I review the research on developing a long-term mindset.
In today’s post, I set the table by explaining how a long-term mindset can benefit your life and introducing the five factors shown to help cultivate long-term thinking.
It can make you richer.
It can make you healthier.
It can make your kids richer.
At the end of this mini-series, I will put it all together in an eBook available only to paid subscribers.
The benefits of a long-term mindset
A 2023 research paper titled “Saving and Attitudes to the Future” provides evidence that long-term thinking can increase the future health and wealth of you and your family.
The researchers analyzed 1970s survey responses to determine each person's 'future-oriented' mindset. Then, they caught up with them several decades later to examine how a future-oriented mindset impacted how their lives unfolded.
Here’s what they found:
Personal Finances: People with a future-oriented mindset are more likely to save money and accumulate wealth. The study found significant correlations between future-oriented attitudes and higher savings in married couples decades later.
Health: The mindset also affects non-financial behaviors like health, particularly in smoking habits. Men with a lower future-oriented mindset are more likely to smoke and less likely to quit that bad habit.
Children's Future Finances: Parents' future-oriented attitudes have a big impact on their kid’s wealth in adulthood. The study notes that attitudes from the 1970s correlated with their kid’s wealth from 2001-2019.
Future-oriented people (which I’ll refer to as people with a long-term mindset going forward) are more likely to have a healthy, wealthy future for themselves and their families.
Which is exactly what we all want out of life.
The five factors that cultivate long-term thinking
Hopefully, you’re convinced about the importance of developing a long-term mindset.
Now, let’s talk about moving from short to long-term thinking.
The researchers used answers from the 1970s survey to create what they called a “future-oriented index” to measure the degree to which someone thinks in the long run.
Here are the factors that contribute to a long-term mindset: