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Ed McKnight: Think about money in decades, not days · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks Be follow
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  Speaker 2: Our personal finance expert Ebingnight from Opie's Partners is here
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  Speaker 2: this morning. Hey, Ed, great to be here, Jack, great
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  Speaker 2: to be speaking with you. So it turns out there
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  Speaker 2: is a big difference between the wealthy and people like me,
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  Speaker 2: probably more than one difference. But the difference you want
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  Speaker 2: to focus on this morning is that wealthy people think
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  Speaker 2: about money in terms of decades, whereas a lot of
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  Speaker 2: people think of money in much shorter terms.
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  Speaker 3: Well, that's exactly right. If you're financially stressed, you tend
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  Speaker 3: to have to think about your money in days. You know,
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  Speaker 3: you're thinking about how do I pay my bills this week?
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  Speaker 3: How do I get through to the next payday? And
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  Speaker 3: that's when you're in survival mode. Now, if you're a
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  Speaker 3: little bit better off, you might think about your money
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  Speaker 3: in terms of months. You know, how do I say
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  Speaker 3: for the next holiday, or you know, maybe I can
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  Speaker 3: save up enough money to buy a different car at
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  Speaker 3: the start of next year. Well, if that's you, you
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  Speaker 3: might be thinking about your money in terms of months,
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  Speaker 3: and in that case, you're in what I call the
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  Speaker 3: comfort zone. But it does turn out that really wealthy
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  Speaker 3: people do tend to think about their money in decades,
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  Speaker 3: and you're thinking about, well, how can I build some
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  Speaker 3: wealth for the next two to four decades. And if
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  Speaker 3: you're in that mindset, you're really in what I call
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  Speaker 3: the wealth mode. But just before I talk about how
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  Speaker 3: do you go about changing your mindset? Because it's easy
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  Speaker 3: to talk about that in theory, but what do you
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  Speaker 3: actually do to change your mindset? Why is it that
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  Speaker 3: we all know we really should invest more but we
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  Speaker 3: don't do it. Well, there's a nerdy term that I'll
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  Speaker 3: teach you to today deck. It's called temporal discounting. Now
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  Speaker 3: forget the technical term. What that really means is our
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  Speaker 3: brains love stuff now, and we don't really value stuff
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  Speaker 3: that we might get in the future. So if you've
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  Speaker 3: got one hundred bucks, you love to spend it now,
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  Speaker 3: you don't really value as much what that money could
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  Speaker 3: turn into few yeah, Yeahmilarly, if you go out and
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  Speaker 3: spend money on your credit card because it doesn't feel
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  Speaker 3: like money is leaving your account now, you don't really
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  Speaker 3: value the fact that you might have to pay interest
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  Speaker 3: on that in the future. So our brains are really
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  Speaker 3: wired to now now, now, getting stuff now, rather than
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  Speaker 3: putting money aside and getting even more stuff in the future.
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  Speaker 2: Yeah, So I did the there's a calculator on your website,
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  Speaker 2: which is really good. So I worked out my kind
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  Speaker 2: of life expectancy given my age and gender and that
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  Speaker 2: kind of thing at the moment. So there's a fifty
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  Speaker 2: percent chance, according to your calculator, that I'll live to
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  Speaker 2: eighty nine, which means that I really do need to
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  Speaker 2: try and get past what is the temporal disconnect and
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  Speaker 2: think about the future.
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  Speaker 3: This is the interesting thing. Now, to a person with
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  Speaker 3: a hammer, every problem looks like a nail. I'm an economist,
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  Speaker 3: so I think every problem can be fixed with a calculator.
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  Speaker 3: So if people google the how long will I live calculator,
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  Speaker 3: and you might need to put in put in open
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  Speaker 3: as my account, the opes and this will come up.
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  Speaker 3: You put in your age, your gender, when you started working,
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  Speaker 3: when you get to retire, and it gives you a
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  Speaker 3: kind of this is your life. So if you're a
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  Speaker 3: forty five year old woman, you started working at the
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  Speaker 3: age of twenty and you want to retire at sixty five,
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  Speaker 3: well you've been working so far for twenty five years.
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  Speaker 3: You've got twenty years left in your work life, and
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  Speaker 3: you've got to use the next twenty years to set
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  Speaker 3: yourself up and pay for the twenty six year retirement
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  Speaker 3: that you're going to eventually have, because you've got a
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  Speaker 3: pretty decent chance of living till ninety one. And so
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  Speaker 3: just running your numbers like this gives you a bit
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  Speaker 3: of this is your life and shows you there is
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  Speaker 3: simply what your life looks like in decades and that
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  Speaker 3: can help change your mindset.
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  Speaker 2: Yeah, so good. Hey, thank you very much, Ed, And
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  Speaker 2: like you say, you can access that how long will
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  Speaker 2: you live calculator on the Opie's website. We'll Wake So
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  Speaker 2: there's a link on the news that was your b
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  Speaker 2: website as well. Guess your own need Jack.
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