Why Your Initial Financial Plan Is Guaranteed To Change

Kyith Ng

Back in my secondary school days, I participated in a regional science exhibition where students from different schools came together to exhibit innovative ways of tackling daily chores such as removing hard stains and how to boil pasta in half the time.

The exhibition was supposed to demonstrate the application of theory into practice and my peers in other schools impressed me with what they came up with. However, what shocked me the most was the questions that I got from the adults attending the exhibition.

The parents, and even some of the teaching administrators, asked us how some of these things work, and to explain the scientific theory that was applied.

Some of the questions they asked were very basic to a secondary school student. I wondered in my head “How could they not know this stuff?”.

I was quite sure that when I approached my 40s, I would not be like them. I would be better than that, I told myself.

Well, fast forward to now, and I am 10 months away from my 40th birthday and thinking about how naïve I was when I was 15. Our environment and the people that surround us change us far more than what we expect.

We Underestimate How Much We Will Change As A Person

Harvard Professor Dr Daniel Gilbert believes that we usually look back at our past and chuckle at how different we were back then.

Yet, many of us believe that we will not change much from this point in our life going forward.

He calls this the End of History Illusion. We believe that our current selves have it all figured out to the point that this is who we will be for the rest of our lives.

In one famous study, 7519 volunteers were recruited from a French science television show to participate in this study. These volunteers were divided according to their age groups. In each age group, they were further broken up into two different groups.

One group was tasked to report their personality traits, preferences (what they like and dislike) as well as their core values (their philosophy and what they believed in).

The other group would predict how the personality, preferences and core values of the other group will change in the next 10 years.

By aggregating the results of the group of people, the researchers can match the predictions to what was reported. Here are the results:

Chart 1Source: Daniel Gilbert – The End of History Illusion. Changes in preferences, values, and personality over time.

There are a few things to note:

  1. The change reported by one group is always greater than the change as predicted by the other. While this observation was done by different people, there is consistency in the whole cohort underestimating their change in preferences, values, and personality.
  2. There is a greater gap between what is reported and what is predicted for people in the younger age groups. This is particularly so for our core values. We have greatly underestimated our philosophies and what you believe in to stick for a long time.
  3. People in the older age groups tend to remain the same more than their younger counterparts. This is not because we get better at predicting ourselves, but because… we just really change less.

Your Older Self Might Not Like The Taste Of Your Current Self

In another survey carried out by Harvard, a group of people were asked how much they would pay to see their favourite band from 10 years ago perform live. And then how much they would pay to watch their favourite band today perform 10 years from now, with all else being equal.

The result? People are willing to pay US$121 for their current favourite band 10 years from now, and only US$80 for their favourite band 10 years ago.

By right, if your preferences do not change, you should be willing to pay an equivalent amount, adjusted with inflation, for the band concert ten years ago and ten years later.

This survey highlights how our preferences could potentially shift over time.

What We Can Conclude

From the two research experiments mentioned above, we can conclude that:

  1. We tend to have a fundamental misconception about the personality, values and preferences of our future selves.
  2. After reflecting and seeing how much we have changed in the past, we still expect us to not change so much in the future!
  3. We make our decisions based on what we like now but our future self may disagree.
  4. To continue from #3, we tend to overpay for what we think we will like today, thinking we will continue to like them in the future
  5. We have no idea how we will change in the future. But that does not mean we will not change.

The End of History Illusion presents a problem when it comes to financial planning.

You currently wish to take care of your future self by engaging a financial planner to plan things out today so that your future self will have a retirement fund and your children’s tertiary education is well taken care of.

But, how can we be so sure that things would not change in the next 20 to 40 years?

When Your Philosophy, Values And Environment Changes, Your Financial Plan Needs To Change As Well

Your retirement sum is derived based on your lifestyle today, the hobbies and vacations you prefer today, the energy level you have today, the dependents that you have today.



30 years down the road, your philosophy in life may have changed. You have seen enough of the world, have eaten enough of the delicacies. Diabetes and high blood pressure kick in, which also means that you must start controlling your diet. Your children have all grown up with their own job and family and are no longer dependent on you.

If you calculate the retirement sum required based on your desired lifestyle today, you think that you would need $200,000 a year in future expenses. Based on this expense figure, your Client Adviser would advise you to accumulate at least $5 million.

However, your future self might only need $150,000 a year, which means you may only need to accumulate $3.8 million for your retirement instead. While over saving is being conservative, we should be mindful that we are exchanging our precious time in this world for money when we continue to accumulate wealth.

You may be able to accumulate your wealth earlier and retire earlier because your future self needs less, and the extra funds could be allocated to other more meaningful goals.



In life, there will be many curve balls thrown your way that necessitates a change in your financial plan. For instance:

  1. Change in core values, personality affects how you live your life. This affects future expenses which affects how much you need in order to achieve financial independence.
  2. Shift in philosophy from career to family. One spouse or both may feel strongly about one of them staying at home.
  3. Change in health status, that requires financial independence earlier than expected.
  4. Shift in philosophy from not wanting children to wanting children.
  5. Shift in core values, from not wanting to take care of parents to want to take care of them.
  6. Shift from being optimistic about their career to being very demoralized and needing to look for a way out through entrepreneurship or change in vocation.

With so many possible shifts in your life, do you really think you can successfully achieve your life goals simply by following the actions drawn out by the original financial plan?

The Greatest Value Of A Financial Adviser Does Not Lie In The Initial Financial Plan

We believe there is much more value in the initial plan.

However, our biggest value proposition is being your financial confidant through your life journey.

When your philosophies and values shift, your financial goals most likely will require adjustments as well.

While this list may not be exhaustive, here are some of the potential concerns you may have:

  1. In the future, will my existing goals need more or less than what was originally planned?
  2. For the new goals, how do we go about determining how much we need in the future?
  3. How do we shift or allocate our existing financial assets so that the outcome is the most ideal?

At Providend, after a financial plan is created for the client, the client and their Client Adviser will have regular progress meetings in the subsequent years. During these meetings, the Client Adviser will update the client on the progress of his/her finances while the client updates the Client Adviser on the changes in his/her life.

In this way, the Client Adviser would have an up-to-date understanding of their client’s situation. They can then recommend their clients to tweak or change their financial plan to match their existing philosophy and values.

This will ensure that the client’s resources have been allocated effectively to help achieve up-to-date life goals and not outdated ones.

Our lives and the environment will change. The greatest value of the adviser will reveal itself as you stick with a good one.

This is an original article written by Kyith Ng, Senior Solutions Specialist at Providend, Singapore’s Fee-only Wealth Advisory Firm.

We do not charge a fee at the first consultation meeting. If you would like an honest second opinion on your current investment portfolio, financial and/or retirement plan, make an appointment with us today.

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