Coming to terms with hyperbolic discounting

It is time to forgo instant gratification in favour of the thrill of accruing real wealth (read health).   With the New Year now 10% gone it is a good time to reassess how we are tracking in terms of our goals for the year 2015.  Have we resolved to get our advance planning documents in order and a conversation with family about our end-of-life thoughts?  If so, are we still on course or have we slackened off, in favour of next month or even next year?

Noel Whittaker writing in the Newcastle Herald recently (In for a long exciting haul, February 5th), reminds us “that the human body is not (naturally) wired for long term planning.  Our ancestors … dominant thoughts were purely about survival”.   “As a result we instinctively prefer an action with a fast pay-off to one with a long term result. The scientific name for it is hyperbolic discounting – it causes people to make choices that can lead to short-term pleasure, but long-term disaster”.   So this is a good time to consider what might be involved if we were to modify the way we think about investing in our long-term future well-being.

It has been said that, those who fail to plan, plan to fail.  Let this not be our way of living.  Resolve to be an ACTOR:

  1. Action a plan
  2. Consult independent sources to build a knowledge portfolio.
  3. Take-steps to draft a plan the contents of which will include:
    1. Will
    2. Advance Health Care Directive (AHCD)
    3. Enduring Guardian
    4. Power of Attorney
    5. Advance Death Care Directive (ADCD)
    6. Estate disbursements (and Succession program if in business or with Trusts to manage).
  4. Organise a family meeting,
  5. Revise, sign and file it in a place that the executors know about.

This process is a great investment, from a health perspective (peace of mind), social perspective (improved family relations) and wealth perspective (save estate and remaining family thousands of dollars in reduced funeral and legal expenses).

It makes for a very persuasive point of view to face down our hyperbolic discounting nature and replace it with some foresight given substance with some forethought.   It is one of those gifts that can be given, reshaped and given again – gratifying to all parties and cause for a party for the dearly departed.

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