One of the prevailing concepts of personal finance that isn’t really talked about is the concept of “future self”. Let’s explore this concept further and determine why we should care about it at all.

According to Wikpedia the concept of future self is

The psychological research on the future self examines the processes and consequences associated with thinking about oneself in the future.

https://en.wikipedia.org/wiki/Future_self

So why would we want to discuss this concept on this personal finance blog?

Since we live the the present tense, it can be difficult to think of ourselves in our future situations. However, remembering our actions today will directly affect ourselves in the future; this is very relevant to personal finance as you will see below.

Regarding personal finance, most people get themselves into trouble when as they neglect to think of their future selves – In essence, when you borrow money you are directly adding a burden to your future self, or put in another way, your current self is “screwing over” your future self.

In essence, when you borrow money you are directly adding a burden to your future self, or put in another way, your current self is “screwing over” your future self.

Personal Finance Experiment.com

If we look at the personal finance circumstances of today, we see that society completely ignores this concept. High levels of debt continue to pile up on both a personal and government level (see chart below). Something that is even more concerning, while the government can continue to issue bonds and print more money to alleviate it’s debt obligations; as a consumer, you can’t and are personally responsible to pay this back.

Moreover, we see that personal debt is not a specific generational issue, based on data collected from CNBC and OECD sources, it appears that everyone is comfortable transferring the risk to their future selves. See the statistics below to see average levels of personal debt.

• Generation Z (Ages 18-24) – Average Personal Debt: $22,000
• Millennials (Ages 25-34) – Average Personal Debt: $42,000
• Generation X (Ages 35-49) – Average Personal Debt: $39,000
• Baby Boomers (Ages 50+) – Average Personal Debt: $36,000

If we expand this to household debt, we see these figures expand further

• Under 35: $67,400
• 35–44: $133,100
• 45–54: $134,600
• 55–64: $108,300
• 65–74: $66,000
• 75 and up: $34,500

These levels of debt place a very high burden on both individuals and families and we can see using the following measure – Your debt-to-income ratio. This measure is a calculation of all your monthly debt payments divided by your gross monthly income.

Based on OECD economic analysis of debt-to-income ratio, Canadians are in a particularly bad spot at 182% of net disposable income and Americans at 109% of net disposable income.

So based on this data, what can we conclude, it appears that both individuals and governments are comfortable with adding huge levels of debt and temporarily transferring today’s happiness and material purchases into additional stress and a potential problem for our future selves tomorrow.

The purpose of this post is not to scare individuals about the high level of personal and government debt, stock up on rations and ammunition and live in a bunker, but rather to educate and open the eyes of individuals in order to address the problem and offer future solutions in tackling this issue.

Please revisit this space as we will work on developing additional tools and techniques in future articles to assist you if you find yourself borrowing from your future selves.

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