Work Guy vs. Retirement Guy: Enjoying Today While Preparing for Tomorrow

Jerry Seinfeld has a great routine about the different versions of ourselves and how they are often at odds with one another.  He uses the example of Night Guy vs. Morning Guy:


 
 
I never get enough sleep. I stay up late at night, because I’m Night Guy. Night Guy wants to stay up late. ‘What about getting up after five hours sleep?’ Oh, that’s Morning Guy’s problem. That’s not my problem, I’m Night Guy. I stay up as late as I want. So you get up in the morning, the alarm [rings], you’re exhausted, groggy… Oh, I hate that Night Guy! See, Night Guy always screws Morning Guy. There’s nothing Morning Guy can do.
— Jerry Seinfeld

We can all relate to the ongoing Night Guy vs. Morning Guy battle.  Night Guy wants to stay up late and finish the movie.  Night Guy has no problem staying out for a few more drinks at the bar.  Sometimes, Night Guy even goes to bed early without finishing his work because it’s Morning Guy that will have to wake up and deal with it the next day.  

These different versions of ourselves play out across several areas of life and it’s important that they coordinate with one another.  Practice Guy needs to put in enough work so that Game Guy can play well.  Study Guy needs to review enough material so that Test Guy can do well on the exam.  School Guy needs to get good grades so that Work Guy can get a job.   There are limitless examples of how our present self needs to behave in order for our future self to benefit down the line.  

One of the most universally applicable examples is saving for retirement.  In this instance, Worker Guy needs to save enough money over time so that Retired Guy can stop working and comfortably enjoy his final act in life. Of course, this concept is much easier said than done.  How does Retired Guy convince Worker Guy to take a long-term view with money decisions?

Our internal system that attempts to prioritize the “Today vs. Tomorrow” battle is one of the most difficult balancing acts in human psychology.  Immediate gratification (now!) will almost always trump delayed gratification.  One of our hardest jobs as financial advisors is to help individuals enjoy today while preparing for tomorrow.  After all, Today vs. Tomorrow decisions are mutually exclusive.  Going on vacation today means less money saved for tomorrow. Putting money in your retirement account (for Tomorrow) means not using that money for home renovation projects (for Today).  But it doesn’t mean that you’re worse off for it!

The key is to find that optimal balance of enjoying the present while planning for the future. So how should you approach these decision points?  There are numerous rules of thumb about how to approach retirement savings (“save X percent of your income,” “plan to spend 85% of your current spending in retirement,”). The problem is that none of these address your own unique individual situation, priorities or values.  

At The Johnston Group, we start every conversation with what we call a Personal Strategy Map meeting. This is a purely qualitative exercise where we brainstorm with clients about their short-term and long-term goals. Once high-level goals have been established, we attempt to quantify them in terms of both dollar amounts and deadlines. After this is done, we ask clients to prioritize these goals.  At this point, clients have good perspective for decision-making in choosing how to allocate today’s dollars.  A hypothetical example of this exercise below shows how it can help shape future decision-making: 

Brainstorm Your Goals and Priorities

  • Buying a bigger home to raise our family 
  • Retire at an age where we can still be active 
  • Give to charity 
  • Education for our children 
  • New car
  • Take annual family vacations 
  • Pay down debt 

Quantify These Goals Into Dollars and Deadlines

  • Buying a bigger home to raise our family ($500,000 house, 2021)
  • Retire at an age where we can still be active (Retire between age 60 and 65)
  • Give to charity (Donate between $1,500 - $2,000 each year to charities)
  • Education for our children (4-year college education at $25,000 per year starting in 2031)
  • New car ($30,000 new car, 2019)
  • Take annual family vacations ($5,000 annual family trip)
  • Pay down debt (Have $22,000 student loan balance paid off in 5 years)

Prioritize These Goals

  1. Education for our children (TOMORROW)
  2. Buy family home (TODAY)
  3. Retire at a comfortable age (TOMORROW)
  4. Family vacations (TODAY and TOMORROW)
  5. Pay down debt (TODAY)
  6. Give to charity (TODAY and TOMORROW)
  7. New car (TODAY)

A comprehensive financial review and analysis can provide a fairly precise financial roadmap for achieving these goals.  Once this is done, the individual understands what it takes to achieve each of these goals and the trade-offs between them.  

For example: 

I’m okay spending a little more on this dream family house, even if that means I have to work a couple of extra years before retiring,

or

I am on track for my retirement savings goal for the year, so now I feel good about taking that family vacation

Good financial planning is both an art and a science.  This powerful exercise provides a useful framework for balancing Today vs. Tomorrow decisions.  While money decisions for Today vs. Tomorrow are mutually exclusive, everyone can certainly find the optimal balance for enjoying the present while planning for the future.  Night Guy doesn’t have to go to bed every night at 8:00, but he’d help Morning Guy out a lot more by taking a long-term perspective on helping his future self.