海角大神

What will you be earning in ten years?

Most of us can鈥檛 really answer that question. We might have a guess as to the answer, but it鈥檚 little more than a guess. However, almost all of us make quite a few decisions today based on our gut feeling about that question.

Let鈥檚 say you knew for certain that in ten years you鈥檇 be making four times as much as you鈥檙e making right now. Would that change how you behaved today?

Let鈥檚 say, on the other hand, that you knew that in ten years you鈥檇 be making only a third of what you鈥檙e making right now. Would you do things differently today?

Now, here鈥檚 the real key question. Which one of those two paths will ensure the best possible future for you, regardless of income?

Unless you鈥檙e doing something strange, the gameplan you would use for making a low income would be far better for you over the long run than the gameplan that assumes a big income.

Why? If you assume a big income, you鈥檙e more likely to make moves today that rely on being able to pay off debts down the road.

If you know you鈥檙e going to earn $200,000 a year in ten years and you only make $50,000 a year right now and you鈥檙e about to buy a home, it鈥檚 going to be far more tempting to buy the most expensive possible home. After all, you know that your future self will pay for it, right?

On the other hand, if you鈥檙e making $50,000 a year and are about to buy a home, but you know you鈥檒l only make about $17,000 a year in ten years, you鈥檙e probably not going to buy the biggest house you can afford at the moment 鈥� that would be completely foolish.

The thing is that we use these kinds of pictures of our future with almost every major financial decision that we make. The more secure and bright we believe our future to be, the more likely we are to commit to big long-term expenses today.

In terms of actually building toward debt freedom and long-term financial security, though, you鈥檙e far better off using a pessimistic future as your guide. If you assume that your income is going to be low in the future, you鈥檙e going to make more conservative moves that keep more money in your pocket.

That way, when the future really does arrive, you鈥檙e far more likely to have more money than you expect than not enough money. This is far better than the other option, in which you assume a rich future and spend accordingly, only to likely find yourself not having enough money when that future arrives.

If you want long-term financial security, avoid making financial moves that rely on you having significant income in the future. If you need to take out a home loan, buy the smallest house you can live with. If you can鈥檛 afford the expensive car without debt, buy the cheaper car. With those lower monthly payments, it should be much easier to sock away as much as you possibly can.

That way, when you wake up in ten years, you鈥檒l find that you鈥檙e in good financial shape no matter what your income happens to be. It鈥檚 a far less stressful way to live.