Finance 101: The end-of-history illusion

We seriously underestimate how much our lives will change.


Over the long arc of time, things rarely stay the same. What was the steady rock of consistency yesterday is somehow irrelevant today. We all realize change happens. We realize that change happens, but think it doesn’t happen to us … but the fact remains that we, as individuals, change quite a bit as we progress through life.

I recently came across some interesting research that illuminates the idea of how changeable we really are. According to an article published in Quartz Magazine on Feb. 17, 2017, “The longest personality study of all time, published in Psychology and Aging and recently highlighted by the British Psychological Society, suggests that over the course of a lifetime, your personality is transformed beyond recognition.”

This study measured six personality traits of over 1,200 14-year-olds. These same people were contacted at age 77, and 174 of them agreed to do the test again.

What they found was that people change a great deal over time. You basically were a completely different person from who you were decades later. Wow.

“This Finance 101 column is supposed to be about finances,” you may be thinking. It’s interesting research you have shared and all, but what has this got to do with personal finance?” Fair enough. I’ll tell you, but first I need to share some more information.

I want to introduce you to another bit of interesting research that coined the term “end-of-history illusion.” This was a finding from a 2013 research study by Quoidbach, Gilbert, and Wilson and was published in Science. I came across this research via the Nerd’s Eye View website, run by well-respected financial planner and commentator Michael Kitces.

The end-of-history illusion study surveyed “people across a wide range of ages, and asked them to either report on how much they had changed over the past decade, or how much they expected to change in the next 10 years, regarding their personality, their core values, and their preferences.” What the study found was that people predicted they would not change over the coming decade, but saw that they did indeed change over that period.

It should be noted that this effect tends to lessen as we get progressively older, but doesn’t disappear altogether.

So let’s bring this little research excursion down to terra firma and personal financial thoughts. We change a lot as we go through our lives, but seriously underestimate how much change will actually occur. And this has real implications when you are planning for long-term financial goals. Perhaps, at age 45, you think, “I am definitely going to want a ski house when I retire, so I better start saving for that now.” It could be anything, really. But the end-of-history illusion shows that skiing may not be very important to you 15 or 20 years from now. Maybe you end up with a bum knee, or discover the wonders of yoga. The point is, anything might change so that what we think we wanted isn’t all that appealing any more.

It’s a great idea to do real financial planning with a professional planner. Many planners use a goal-based approach, which is a reasonable place to start. In that approach you are asked, well ahead of time, what kinds of things you want to do when retired. This is where the ski house comes in. Since we know it’s very possible that we will change over many years, goals-based planning may not do the best job of identifying our wants in the future. But that doesn’t mean it isn’t a good way to give yourself a reasonable way to get prepared.

I think we need to embrace our inevitable change, and we can help future selves get a lot of what they want. First we need to see our lives as a continuum of change into a somewhat unknown future. This will require flexibility in our thinking and our planning. We also need to start planning when we are young, and set some ambitious goals. “But John, you just said we may not want then what we think we want now!” And it’s true. Just start saving a lot, so you have lots of options when you are much farther along. Then you can pick what you want with greater accuracy.

Two additional thoughts: When you have an actual financial plan, you can revise your goals and wants as you inevitably change. And it also may allow you to enjoy your life a bit more as you get closer to stopping your work life. By working with your plan, you may see you have plenty of money saved for what you are more confident you want to do. That would allow you to, heaven forbid, actually slow down your current savings and enjoy that money now. I know that sounds like a heresy, but it really isn’t. By that time in your life, compounding of your money is moving the needle far more than your current savings do.

I’ll end with a quote on the nature of change in life. The last part sounds a bit terse, but I like just the same: “Life is a process of becoming, a combination of states we have to go through. Where people fail is that they wish to elect a state and remain in it. This is a kind of death.” –Anais Nin


John Kageleiry is a business writer and financial planner. Have a question for “Finance 101”? Email it to