This Is the Reason You Can't Stick to a Savings Plan
Why We Choose Impulse Buys Over Long-Term Goals
Get Free Access to the Paid version of Making of a Millionaire
The MOAM referral program has launched. Basically, you get a month free for every person you refer to read Making of a Millionaire.
If you can’t pay for a paid subscription to MOAM, referring a friend is a great way to help this publication grow and help more people.
Not subscribed yet? You can do so here:
Saving money is hard for any of us, especially when we have so many competing priorities stealing our attention, and impulse buys are just a click away.
Saving is like exercising, we all have great intentions, but we struggle to stay the course on our well-made plans for the long run.
One of the reasons we can’t stay focused on our financial goals is that most people struggle to align their long-term goals with our short-term actions.
Read to the end of this post to learn how a fancy term called “hyperbolic discounting” can help you understand why it feels so hard to stick to a savings plan—-and, more importantly, what you can do about it.
What is Hyperbolic Discounting?
Hyperbolic discounting refers to the phenomenon where people prefer immediate rewards over long-term rewards. In other words, they tend to prioritize instant rewards, even if it means sacrificing larger rewards in the future. This can have significant impacts on our savings behavior, as we may prioritize immediate consumption over long-term savings.
How Hyperbolic Discounting Affects Our Saving Choices
From here on, I will replace the term “hyperbolic discounting” with “short-term thinking” because I hate using jargon.