But as with most things in financial planning, time preference isn’t an “all or none” condition.
And that’s where things can get nuanced.
For example, if you have a child or grandchild graduating from high school this year, I would imagine your time preference for college planning and savings is pretty high.
However, if you’re 37 years old and you’re consistently saving for your retirement in 20-25 years, your time preference
for retirement planning is pretty low.
We could easily identify dozens of other examples of both high and low time preference when it comes to your money decisions.
But just as I mentioned above, when you think holistically about your life and your financial planning, time preference isn’t absolute.
For example, in the examples above, which do you prioritize?
Planning and saving for college or planning and saving for your own retirement?
And remember, they’re not mutually exclusive.
Yet, I often meet people who have such a low time preference, that they don’t give themselves permission to enjoy their financial resources today.
And whether that’s a retiree who is fearful of spending too much today, or a middle-aged professional who saves and saves at the expense of enjoying their life along the way, many people do seem to approach time preference as binary.
As all or none.
But it’s really about balance.
It’s about being well prepared for an uncertain future while at the same time making the most of the one life you have each day along your life’s journey.
And while working to establish and maintain this balanced time preference
, life can punch us all in the nose.
Whether that’s a global pandemic, job loss, death of a loved one, or all of the above, it’s easy to imagine how your best laid plans (financial and otherwise) can be thrown off track.
Ultimately, we all have to take care of ourselves today if we want to be around to enjoy the future.
And whether that’s taking care of yourself financially, physically, or spiritually, just be sure you’re taking care of yourself and those who are important to you.
But while tomorrow isn’t promised, that doesn’t mean we should plan on it.
And exploring, establishing, and maintaining time preference balance that works best for your personal situation is something that I think is a great way to take care of yourself.
I believe there’s a lot more to this idea of time preference and its role in your financial and retirement planning.
But I’m curious to know what you think.
Hit reply and let me know.