Navigating short-term thrills and long-term goals

A few weeks ago, I was the best man at my oldest friend’s wedding.

We go back a long way - to the Autumn of 1977 when he arrived at my village school and promptly stole my place in the football team. But I let it go.

My role was clear; the outcome required unambiguous. Get the main man to the right place at the right time, preferably fully clothed. The rings. And the speech.

I experienced my fair share of sleepless nights in the lead up to the big day. I secretly worried about the speech, whether I was doing enough to help, and whether everything would go smoothly on the day. 

Of course, once I saw the bride walking towards us, the tension melted away: mission accomplished. And actually in that moment, all my worries leading up to that moment seemed so insignificant. It was all just noise. 

There’s often a struggle between balancing short and long-term goals, whether you’re planning a wedding, helping the kids, saving for your retirement or all three at the same time. 

Often it’s much easier to focus on what’s in front of us, it demands our attention and is usually much more exciting and gratifying.

Additionally though, we often underestimate the impact of decisions we make today on our futures. In his six-minute Ted Talk that’s well worth watching, Dan Gilbert says “Human beings are works in progress that mistakenly think they're finished." We fail to recognise the different person we will be in 20 years’ time. The easiest way to illustrate this is to look back 20 years instead of forward 20 years, and see how far you have come in terms of beliefs and values.

It’s unsurprising, then, that we might find ourselves torn between long and short-term goals, unsure where to place our focus and what to prioritise. The result is many hours spent planning next year’s holiday, which feels really important to us now, and putting off planning for the longer term.

Planning for the long term is crucial

I started my career at Prudential back in 1988. The old timers there kindly shared their wisdom and counsel: I was encouraged to find out how much I’d need to contribute to be able to retire at 55 or 60, rather than 62. 

So I wrote to my employer to find out and received a response quite quickly. If I wanted to retire 7 years early, I'd only need to contribute £100 a month. I was young and had time on my side, so most of the heavy lifting would be done for me. Did I listen? Of course not. Foolishly, I contributed just £10 a month. 

Unable to travel back in time and shake sense into my younger self, I now pay into a top-up for my daughter Sophie’s pension for her (she doesn’t know this!). Like so many in their 20s and 30s, Sophie has to fight to prioritise long-term goals when the short-term ones need urgent attention. Inevitably for most people, the short-term takes priority, which is right. Early in careers financial resilience is hard to achieve, and your future self is a stranger.

Short-term noise

Sophie has a friend who’s thinking of opting out of her teachers’ pension scheme and using the money to pay off credit cards. (I can almost hear you shaking your heads.) She believes it’s not only financially sound, but it’ll help her mental health. When my daughter told me this story, she assumed I’d be against such a thing.

As I explained in a recent post ‘Is now a good time to move to cash?’, the psychological side of money is just as important as the financial side. If your credit cards are giving you sleepless nights but you’ve been diligently putting money in your pension each month, pausing (or preferably lowering) your contributions for a little while might not be the worst decision in the world.

I’ve spoken to a few clients recently who, concerned about rising interest rates, are thinking of paying off their children’s mortgages. When we calculate the amount of interest this would save and compare it to the amount we could earn in the stock market, such a move might not make financial sense in the long term. And yet, if helping their children to become mortgage debt-free will relieve stress and improve the quality of life for everyone involved, I’m not completely against the idea.

Of course, there are many considerations, I often work in grey areas when people want black and white, certainty.

I’m sure you know people who spend their lives worrying that they’ll run out of money in retirement. Even those with £2m pension pots assume they’ll be living off beans on toast in their later years. So what do they do? They sacrifice travel, time off and lazy afternoons with family members so that they can build an even bigger nest egg. This isn’t the right answer either.

Finding the perfect balance

So how do we find the perfect balance? Well, with a financial planner at your side, it’s possible to achieve both short-term and long-term goals. 

My clients’ goals are at the heart of everything I do. If a client wants to retire at 50, I’ll find a way to make it happen, without sacrificing all the smaller milestones such as holidays, house purchases and kids’ driving lessons along the way.

As well as creating a comprehensive financial plan I’m in the background, making sure everything is running smoothly on the surface, but taking the fiddly bits of your hands. I’ll monitor your portfolio, keep up-to-date with changing rules and regulations, but I’ll also keep checking in on what really makes you happy so that what we’re working towards is still exactly what you want it to be.

My focus is on your overall goals and contentment, but for that to work, I also need to be looking at the everyday details. A bit like a financial best man - but without the rings!