Why You Can’t Predict Your Future Financial Decisions

Gabrielle Karol
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When looking back on old photos of ourselves, a couple of thoughts jump out: I can’t believe I dyed my hair that color … Why did I buy that sweater? … I wish I had never started smoking. The one thread that ties all of these sentiments together can be summed up as, “Wow, things have really changed.”

A new study in the journal Science has some interesting findings regarding this sentiment. Apparently, people are very good at identifying what has changed about themselves over the years—but very bad at realizing that their tastes and preferences will continue to change moving forward.

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So, your favorite book/band/cuisine/color/style of dress? Chances are, it won’t be the same in ten or so years.

Interestingly enough, this phenomenon also has financial implications. In The New York Times, John Tierney writes:

“When asked about their favorite band from a decade ago, respondents were typically willing to shell out $80 to attend a concert of the band today. But when they were asked about their current favorite band and how much they would be willing to spend to see the band’s concert in 10 years, the price went up to $129. Even though they realized that favorites from a decade ago like Creed or the Dixie Chicks have lost some of their luster, they apparently expect Coldplay and Rihanna to blaze on forever.”

In short, we seem to be pretty bad at understanding how some of our purchases will appreciate over time, in that we feel like the things we really like now will be worth even more down the road.

While there’s no easy way to predict how your tastes will change over the years, consider revisiting some of the major purchases you’ve made in the past. We’re sure there are some regrettable buys, but don’t beat yourself up over those—you probably really did like them back then! Then, try to isolate the types of purchases or spending that have always given you pleasure, like travel or spending quality time with friends or family.

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While this exercise won’t dramatically change your spending habits, it will definitely give you some food for thought!