Page 147 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

new parent in their 30s may think about life goals in a way their 18-year-old
self making career goals would never imagine.
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Long-term financial planning is essential. But things change—both the
world around you, and your own goals and desires. It is one thing to say,

“We don’t know what the future holds.” It’s another to admit that you,
yourself, don’t know today what you will even want in the future. And the
truth is, few of us do. It’s hard to make enduring long-term decisions when
your view of what you’ll want in the future is likely to shift.

The End of History Illusion is what psychologists call the tendency for
people to be keenly aware of how much they’ve changed in the past, but to
underestimate how much their personalities, desires, and goals are likely to
change in the future. Harvard psychologist Daniel Gilbert once said:

At every stage of our lives we make decisions that will profoundly
influence the lives of the people we’re going to become, and then when we

become those people, we’re not always thrilled with the decisions we made.
So young people pay good money to get tattoos removed that teenagers
paid good money to get. Middle-aged people rushed to divorce people who
young adults rushed to marry. Older adults work hard to lose what middle-

aged adults worked hard to gain. On and on and on.⁴⁸

“All of us,” he said, “are walking around with an illusion—an illusion that
history, our personal history, has just come to an end, that we have just
recently become the people that we were always meant to be and will be for
the rest of our lives.” We tend to never learn this lesson. Gilbert’s research
shows people from age 18 to 68 underestimate how much they will change
in the future.

You can see how this can impact a long-term financial plan. Charlie Munger

says the first rule of compounding is to never interrupt it unnecessarily. But
how do you not interrupt a money plan—careers, investments, spending,
budgeting, whatever—when what you want out of life changes? It’s hard.