Live in the past to get better with money

What’s your approach to time?

Most life coaches will attempt to convince you of the benefits of living in the present.

From a personal finance perspective however, living in the past might be a better choice.

New research by Stanford University has found a “high degree of correlation between a person’s approach to time and their financial health.”

The researchers concluded that your approach to time has a bigger impact on your personal finances than your education or financial literacy.

People who live in the past tend to be “once bitten, twice shy” and therefore adopt a more conservative approach to their money management.

If you live in the present, as suggested by just about everyone in the ‘lifestyle optimisation industry’, your financial decisions could be more impulsive. Acting on impulse is rarely sensible when it comes to your money.

If you focus on the future, you are good at setting yourself up for success, but more likely to make poor financial decisions if you don’t have reliable information to hand.

The link discovered by the researchers between financial literacy and financial health was also quite interesting.

They discovered the two are not as closely correlated as you might assume, with those individuals who demonstrate “a high degree of financial acumen” not reliably in good financial health.

One finding with relevance to my current work on a documentary about Baby Boomers in retirement was that millennials think they’re less financially literate than Baby Boomers but are, in fact, financially healthier.

This challenges the widely held belief that boomers are generally better off financially than the subsequent generations, despite their grounded belief that they lack the experience or knowledge to make wise financial decisions.