This one mistake stops you from getting rich and achieving your biggest goals


Have you ever gone shopping for work clothes — and ended up with three impractical shirts or two “fun” pairs of pants you just had to have? Or have you ever bought that extra round of drinks even though you’re already tipsy? Each case alone feels like no big deal, but as time passes, your choices amount to an escalating trade off: You’re swapping pleasure now in exchange for some financial pain down the line.

Yes, that future cost doesn’t seem like a big deal in the moment you make your choice, but combined together, these can add up to a pattern for which behavioral economists have a name: Temporal discounting is a prime culprit for the poor decisions we make about money, life and what will really make us happy in the long run — by incorrectly feeling today’s concrete happiness is worth more than an abstract future reward.

“Humans are not good at thinking about the future,” said Moran Cerf, a business and neuroscience and professor at Northwestern’s Kellogg School of Management. “We are the best animal out there in doing that, but still not good.”

Study after study has shown that we tend to make myopic choices, because they feel like a good idea at the time — even when they really aren’t. These include using high-interest credit or taking out loans to cover expenses (whether on fun or rent); spending on vacation but saving only a little for retirement; and focusing energy on immediate urges, like a growling stomach, despite long term health and savings goals.

The good news is that our brains are equipped to think deliberately about future-looking abstract concepts — if we make the effort. “Humans in the last hundred thousand years have figured out a way to start simulating ideas about the future thanks to the prefrontal cortex,” said Cerf. “This is why humans can communicate ideas about... democracy and the afterlife, and share them even though they don’t exist in the real world.”

What this might mean for you is that simply becoming more aware of your mental fallacies could help you overcome them. Whether you’re trying to build your business or just stop being so impulsive, long-term thinking is your friend.

Take it from Jeff Bezos, who titled his first shareholder letter, in 1997, “It’s all about the long term.” As he later told Harvard Business Review, “Long-term orientation is essential for invention because you’re going to have a lot of failures along the way.” Turns out, Bezos is onto something. Publicly traded companies with a long-term focus tend to perform better on everything from profits to market capitalization, according to a 2017 report from McKinsey, which analyzed 615 large-cap and mid-cap firms from 2001 to 2015.

So how do you hack your brain to get what you really want in life? The first trick is to understand your biases. “Be aware of your tendencies and keep perspective through having regular time for reflection, such as taking a break mid-day to see if you’re on track, or touching base with a friend or coworker before making a decision to take on something new,” said Elizabeth Grace Saunders, author of the forthcoming book, Divine Time Management.

But that’s not all: The next step, of course, is to find ways to outsmart these self-defeating impulses. Here are five steps you can take to make yourself richer by looking at the big picture.

1. Prioritize your “loves” over your “wants.”

When you go out to eat, do you find yourself staring at the menu and wanting to order every single thing, from appetizer to dessert, because it all looks delicious? One way to make a quick decision that won’t leave you with way more than you can eat — or afford — is to use a simple filter that Tiffany Aliche, a personal finance expert better known as the Budgetnista, devised that applies equally well to just about any buying decision you need to make. Just ask yourself two questions: Do you need it? Do you love it?

“Everything else is ‘like’ or ‘want,’” said Aliche, who added that these items essentially “rob you” of those things in life you actually need or love.

This trick works for making bigger-picture buying decisions too. Say you love to travel and never regret a vacation, for example, but when you end up with expensive clothes, or going out for brunch or overpaying in rent for your digs, you don’t feel great. Your choice is clear: It makes sense for you to act frugally in other parts of life so you can plan that safari in Botswana.

Olga Danylenko/

How else can you distinguish your likes from your loves? Ask yourself: “If you had Oprah’s bank account, what would you do, If money was not an object? You start to pick things that are really meaningful to you,” Aliche advises.

2. Gain perspective on when less now means more later.

People with poor impulse control get a bad rap, but, the truth is, it’s human nature. In one classic study, participants were asked to choose what food to eat in a week, with the options of a piece of fruit or chocolate. Seventy-four percent went for the healthier option of fruit. But when they were asked what they wanted right now, 70% chose the chocolate.

A variation on this idea, known as hyperbolic discounting, shows that the further you delay rewards, the more likely you are to make the smarter choice. For example, given the choice between one piece of chocolate now and two in a week, more people are likely to choose one now, Cerf said. But if you were given the option of one piece in a year or two pieces in a year and a week, most people would hold out the extra week.

Once you understand how your brain is tripping you up this way, you can use that knowledge to make smarter decisions, especially if you focus on positives. For example, while it might seem best to max out your student loans while you are in grad school — so you can spend more time studying — taking on a part-time job or work as a teacher’s assistant could significantly reduce your future loan costs. Same goes for saving for retirement. It may seem like a drag to put 10% (or more) of your take-home pay into your 401(k), but when you realize that also lowers this year’s taxable income, having a little less cash to spend now won’t feel quite as painful.

For smaller purchases, you can make better choices by committing to wait before you whip out the plastic. So if you are choosing between, say, a pair of $80 boots versus a $120 pair, give yourself two weeks to decide. While you might still settle on the more expensive pair, at least you won’t be making a decision solely on impulse.

3. Make a “Ulysses contract” you can’t undo.

Sometimes no amount of trying to outsmart yourself will keep you from making a dumb choice about money. That’s when you need to turn to Homer. In his epic poem the Odyssey, the ancient Greek writer wrote about how the warrior Odysseus, or Ulysses, had his shipmates literally tie him to the mast as they sailed past the beautiful Sirens so as to avoid becoming so enchanted by their song that he would be powerless to resist them and would crash upon the rocks in an attempt to reach them.


This same idea has been applied to everything from meeting deadlines to quitting smoking to committing to a healthy diet: One study found that people who voluntarily agreed to forgo bonuses at work if they failed to purchase more healthy food were more likely to stick to their pact than those who created no such incentive to do so.

It may sound gimmicky, but it works. Say you want to commit to going to the gym three times a week. If you decide to pay in advance for personal training sessions, for example, you are much more likely to follow through on your goal than you would be otherwise, Cerf noted. “Having a trainer makes you go when you are tired. The trainer adds a component of accountability,” he added.

4. Use the buddy system to stay on track.

If you don’t want to tie yourself to a mast like Ulysses, you could make smarter decisions about money just by enlisting a friend who’s trying to reach their own goals — or who has a financial or emotional stake in helping you reach yours.

When you’re making decisions on your own, you may not realize when you’ve fallen into traps like the “scarcity mindset” in which you become so worried about one problem that you create other ones in your effort to solve it. A good example of this is taking out payday loans to make the rent. People feel like “they have to put out fires right now,” notes Jiaying Zhao, a professor of psychology and sustainability at the University of British Columbia. “So they will take out loans at unbelievably high interest rates. They end up in the cycle of poverty, in the debt cycle, and they never get out of it.”

If you can’t get perspective on your own, it helps to have someone who can help you achieve it. If you’re married, you might divide up purchasing decisions based on who is most likely to be responsible with money. Or if you want to reach a work goal, make a pact with a friend where you both send each other a progress report each day. To make it fun, you can even have whoever fails to follow through buy beers for the both of you at the end of the week.

5. Don’t go overboard.

Economic theorist John Maynard Keynes famously said, “In the long run we are all dead.” While there is some debate on exactly what he meant by that, one takeaway is that just as short-term thinking traps like the gambler’s fallacy —which leads you to believe, for example, that, just because you got tails five times in a row in a coin toss, you are more likely to get heads the next time — can lead you astray, so, too, can thinking solely about the long term.

Take, for example, the idea that owning your own home free and clear is the dream. Sure, that would be great, but if trying to achieve it sets you back in other ways, was it really worth it? “If you look at your finances and can’t afford the mortgage, in some ways it doesn’t matter how good of an investment it is because you don’t have the money to pay for it,” Saunders said.

A common trap homebuyers fall into is budgeting only for mortgage payments, without factoring in extra expenses like repairs, which can add another 4% in annual costs. Before sticking yourself with 30 years’ worth of debt, you might be better off shoring up your emergency fund by making sure you have up to six months’ worth of savings. Having your mortgage paid off won’t do you much good if you wind up with tens of thousands of dollars in credit card debt from an unexpected cost, like a medical bill, to get there.

Sign up for the Payoffyour weekly crash course on how to live your best financial life.