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Top hacks to make investing for retirement feel less like a sacrifice

01 December 2021 Allan Gray

If you struggle to stay motivated to invest for retirement, there are a number of psychological tools that you could consider tapping into. So says Thandi Skade, investment writer at Allan Gray, who shares her top hacks for fostering habits that promote improved investment outcomes.

Hack 1: Temptation bundling

“Temptation-bundling is a powerful tool to generate willpower, which could ultimately be harnessed to alleviate the psychological pain that we associate with things we perceive to be a sacrifice, like saving for retirement,” says Skade.

Temptation-bundling is the idea of combining two particular types of activities: one that is beneficial, but that you often put off actioning because it’s not much fun, and one you enjoy doing, but that is not the most productive use of your time or resources.

“You are more likely to change your behaviour and form good and long-lasting habits when you are immediately rewarded for completing an action perceived to be a sacrifice,” says Skade. “By linking a reward to a difficult task through temptation bundling, what you are really doing is reframing your perception of a task into something you can look forward to, instead of something you'd rather avoid.”

She uses the example of an annual meeting with a financial adviser, which you may experience as an anxiety-inducing exercise. Instead of delaying it, consider making the engagement less formal by meeting at your favourite leisure spot (the reward) to plan for your financial future (the task that “ought to” be done).

“The key to effectively applying temptation-bundling to achieving long-term financial goals is finding a way to include rewards in the process so that it becomes an instantly gratifying experience and a foundation from which good habits can be formed.”

Hack 2: Psychologically reframing an overwhelming event, making it more manageable

It is naturally overwhelming to think of the large amount we will ultimately need to see us through retirement. However, if we rather focus on a monthly amount we can afford, and commit to a regular debit order that escalates annually, it suddenly feels more manageable.

“Being confronted with a smaller, more palatable figure makes it psychologically easier to commit to making the sacrifices required to benefit our future selves.”
Remember, she says, it is typically less painful to tackle a new goal by starting small.

“This could mean supplementing your pension fund benefit provided by your employer with monthly contributions to a retirement annuity or tax-free investment, or setting up a monthly debit order to a unit trust – suitable for most of your investment goals. Starting with a small contribution and gradually increasing it over time can make it easier to commit to automatic, annual debit order increases.”

Hack 3: Use the power of visualisation to bridge the gap between your present and future self

Skade says psychologically reframing how you identify with your future self can give you extra motivation to save for retirement.

“The act of visualising your future self enables you to build an emotional connection and identify with this person, making them feel less like a stranger. The more you can connect your present self with your future self, the more likely it is that you will align your present-day behaviours and decision-making processes with those goals,” explains Skade.

She says one should start by creating a vivid image of what your future self looks like: Consider things like the physical appearance, needs, goals, desires and the kind of life you want to live in the future.

“To make it more real, you could even write a letter from your future to your current self,” she suggests, noting that in changing our natural pattern of time travel by going to the future and working backwards, we are forced to step into the shoes of the individual we may become and view things from ‘their’ perspective.

“Beyond these powerful behavioural interventions, consider seeing an independent financial adviser who can help you overcome biases and encourage you to remain committed to your financial goals,” concludes Skade.

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