Human nature is complex and deeply ingrained into our DNA. It’s what drives us to survive and thrive and governs everything from how we eat and drink to our desire to defend ourselves and our loved ones.
When it comes to finances, human nature can also play an important role.
Human Nature and Lifestyles Present and Future
Let’s consider how we plan for our financial future and the lifestyle we want to achieve. This planning happens throughout our lives. As young people, we may think about career paths, about starting and supporting a family or of buying a home.
In our middle years, we begin to think about retirement and the type of life we want to live as we retire. In our older years, we think about how to remain healthy and active, prepare for medical expenses and simpler living situations.
Your future lifestyle depends on two factors. Both of those are dependent on the money you save, either via savings or investments.
Working to save money takes effort and is not always our natural instinct.
The natural flow is we earn income through salaries. In some cases, we divert some of that income into investments and savings.
The rest of our income is reduced via taxes, with government entities taking their share in the form of income taxes at the federal, state and local level. Other programs, such as Social Security payments, also come into play.
The remaining available money continues to flow outward to pay for our current lifestyle. It’s the remainder of the paycheck that goes to cover things like our mortgage, utilities, loan payments, groceries, clothing and living expenses for ourselves and our families.
The reality is that the money spent on those necessary costs is gone forever.
For many of us, large expenses – our homes, our cars, college educations are financed. That further adds to the loss of available income via the interest paid to secure the loans to pay or those expenses.
In total, the pressures and needs for these current lifestyle items directly impact the ability for us to prepare for our future lifestyle needs and expectations.
Our human condition makes us inclined to seek out items that bring us pleasure, comfort or joy. Advertising and marketing is a powerful way that companies use that desire against us, bombarding us with messages that encourage us to buy things – vacations, luxury items, premium cable channels, toys and collectibles and more clothing.
However, all of those enticing ads lead us to make impulse purchases using our currently available money. But doing so also means we no longer have that cash available to put towards our future lifestyle needs.
This purchasing strategy can be dangerous.
Why is it so challenging for us to save for the future, be diligent about what we’re spending our money on, and be careful about accruing too much debt? Part of the reason is our human nature – the way our brains have been wired.
A recent CNBC article noted that our brains are, in fact, wired to focus on short-term survival. For thousands of years, humans needed to protect themselves from dangerous threats and compete for limited resources.
Those learned behaviors have become deeply engrained in the human condition. Our instincts tell us to focus on the short term, because the long term is fraught with uncertainty and danger.
Our ancestors were simply not focused on saving as there was little point in doing so. Consider what saving meant to the earliest humans. “Saving” meant carrying what you had, because predators and other humans could easily swoop in and take what was yours.
The most valued commodity – food – could not easily be saved for very long for two years. For one, you got hungry. For another, food would spoil quickly. You consumed what you had out or necessity and practicality.
Another instinctual barrier to savings is the need to share with others. Among the earliest humans, hunters needed to provide not only for themselves, but the rest of their group. What was taken was distributed to others.
Human Nature and the Need to Save
Consider how challenging it is to fight against these fundamental parts of human nature.
For those who do indulge on goods and services, we are in a sense borrowing from our future earnings. And very few of us who do so end up paying ourselves back. Even fewer put back both the money they spent and the interest they lost had they kept the money in investments or savings.
Is your human nature getting in the way of your financial future? Learn more by watching this free video and registering for our free program, Financial Foundations, to learn how you can maximize your money.