The Time Inconsistency Problem and How It’s Hurting You

We live in an immediate-return environment. What you do right now, can immediately result in a well-defined outcome. But there is a problem. Our current actions don’t always bring immediate results. Or at least, the type of results that are good for us in the long term. But since we’re emotionally driven creatures that want to feel valued and respected, we don’t think much about potential future gains. We focus on experiencing good sensations right now. Therefore, we are more likely to choose something pleasant today even though it will probably sabotage us in the future, and we’ll later hate ourselves for doing the stupid thing in the first place, but we nonetheless do it. Economists call this time inconsistency. Our decisions for the same things are inconsistent in different periods of time. And while people handling big money are the ones who primarily talk about this concept, it’s something we all need to understand.

We are constantly facing the following dilemma: Should I spend money to get this [whatever], or should I invest it and gain more in the future?” Or, “Should I excite my sugar-obsessed body with this chocolate-heavy cake, or, instead, consume something that was previously sitting on a tree (e.g., apple)?”

Something that you might think is not so important today – starting a retirement fund, being more mindful about how you spend your leisure time, what you eat – can lead to a future period where you’ll probably regret not thinking more about it in the past.

For me, the thing I regret most is not saving more money when I was in my 20ties. Or, not spending just a little more time – just a bit – studying the now-modern languages: HTML, CSS, JS.

I had a beautifully crazy time when I was younger – don’t get me wrong. It was like a never-ending rave party. But, as you can imagine, these fun activities aren’t particularly practical in the age of digital nomadism and app management. And, more importantly, what I previously considered fun and “I can’t live without” is no longer on my daily agenda.

Of course, we all do stupid things which we later regret. The point is not to feel worse about what you did in the past. The point is to be a bit more mindful about how you approach your daily decisions that will eventually form the environment you will adopt in the future.

That’s exactly what we will discuss in this post. The time-inconsistency problem and how it influences our current and future lives.

What is Time Inconsistency Exactly?

At every stage of our lives, we make decisions that eventually profoundly influence the lives of the people we are ought to become.

Smoking cigarettes now feels like injecting heaven into your mouth and hugging clouds. But 10 years later this simple activity will turn your breathing organs into barely functioning exhaust-like pipes, a bad breath, a hazardous-looking fingers.

We probably love the activity now, but a couple of years later, we’ll probably hate ourselves for acting so recklessly in the past. This makes us inconsistent across time. Or in other words, the things we usually want and do now are not that useful when the future arrives.

One circle with the text What you do today and an arrow pointing to a text stating forms your future  environment
What you do today forms your future environment.

Generally, time inconsistency can be tight to our instant gratification habitat. In simple words, we discount the value a future benefit will bring in order to obtain a less rewarding but more immediate benefit. For example, we might say something like: “Investing money is too risky. It’s best to keep my cash around and spend it why I’m still young.” Or, we simply go hardcore and state, “I’ll leave this problem to my future self to handle” and we spend all of our money on gadgets and fancy cars to impress our peers.

In the first example, we “discount” the value of investing to convince ourselves that what we’re currently doing with our money is OK – spending on luxury stuff, fancy clothes, etc.

And while these examples explain the time inconsistency problem, the concept is a bit broader.

Time inconsistency is also about how we change at different points in time. How our desires evolve and thus our actions. This requires understanding these two common human patterns:

First, we view what we do now as the perfect thing for the current moment but we rarely realize that when a future period arrives, the actions we are currently doing are often suboptimal. Secondly, our desires change over time. And not only that, but the world also changes. Our skills at a later stage of life will be either highly endorsed, average, or not at all desired. This depends solely on how you are spending your time right now.

Or in other words, working a decent job today doesn’t guarantee that you will remain competitive in the job market after say, 10 years. If you don’t continuously learn new concepts and adopt new skills, you will surely have to lower your standards at some point in the future.

Your ability to assess yourself, understand how your current actions will influence your future self is key to adopt riches at a later stage. Sadly, forcing yourself to think about what will happen in the future is something we rarely do.

On most occasions, we are focused on the here and now. Neglectful of what will happen at a later stage.

That’s why understanding the time inconsistency problem is so important.

Why Failure To Understand Time Inconsistency is Bad?

As residents of the present moment, we put great emphasis on what is happening in the current immediate situation.

What we are doing is often destructive for the future self but as long as it makes us feel good now, we let it pass.

The examples are countless: we smoke, drink, eat a lot of fatty things, hang around people we don’t particularly like, spend time in online discussions that are pointless, work mentally damaging jobs, don’t think about how we manage our money, etc.

The reasons we are so blindly unaware of how our current actions are destroying our future are plenty. However, we are not stupid. We know that smoking can literally kill us, for example. The main reason we don’t give up on our damaging habits has to do with something else. With our emotional side. With this reality: We feel first and then we think.1

The numero uno thing our brains want is feeling good here and now. The cost is unimportant. That’s actually why we often end up buying things we don’t really need with money we don’t really have. That’s also the reason we are so disturbingly obsessed with short-form content and social media.

When not directly supervised, the mind wants to experience pleasant sensations – at the current moment. Internally, we are careless about what will happen in the future.

For example, when we are facing a well-crafted dessert but when we are on a diet. There is a lot at stake not only for the body, but also for the brain. Internally, a discussion like this occurs:

  • Feeling brain: Cake! I want it!
  • Rational brain: No. We are on a diet!
  • Feeling brain: Well, technically yes. But we can always start, or re-start, our diet tomorrow.
  • Rational brain: You already said that… yesterday.
  • Feeling brain: Shut up! We will only eat 1 slice, OK! Besides, what if we get stuck in a traffic jam on our way home. Or worse, if there is a major crash and we can’t get home for hours. We need reserves!
  • Rational brain: That’s unlikely to happen. You are making stuff up…

And while the current self will eat the dessert, the future self can think about all our past encounters with sugary food and feel betrayed by himself.

Our present self holds desires that will change for the future self. But we always give more value to what is happening now compared to any future time.

That’s why you will rather get, if someone was to offer, $200 today instead of $210 in one week.

A graph showing that we are more excited if we get $200 today as opposed to getting $210 after one week
Our tendency to want to experience pleasure now will make us take $200 immediately instead of waiting a week more to get $210.

However, if the situation is a bit different. Say the same person offers you $200 in one year or $210 in one year and one week, you most probably choose to wait a week more.

A chart showing that we are equally excited if we receive $200 in a year or $210 in a year and a week
If the reward is not instant, we’ll choose to wait longer and get the bigger reward.

In the second example, waiting a week more doesn’t feel so long right now – after all, it’s a year from now. But in the first example, we can find a lot of reasons to get the money at this moment instead of waiting for getting just a bit more after only one week.

We all know that saving money and not eating cookies can be good for your body – but that’s not something you experience now. That’s something in the potential future. That’s something the future self will experience. But since the future self is not you at the moment, we’ll choose the thing that leads to immediate observable effect. In other words, you care more about yourself now, not enough about your future self.

But since the future will arrive at some point, reckless past behavior can make the rest of your life miserable.

Imagine robbing someone at ending up in jail. This single event that was done from your past self in, for example, under an hour, can make your whole future life a living hell.

What Are Common Examples Of Time Inconsistency In Our Lives?

Our weight is a perfect example of the time inconsistency problem.

How much you weigh is a direct representation of your ever-changing self.

Personally, I constantly go from having a belly to having a well-formed stomach. In different moments of my life, because I feel differently – probably I’m depressed or I haven’t had enough sleep, or I didn’t exercise enough – I have to live with my bouncy stomach. Other times, I get super excited and motivated to participate in monthly fitness challenges. I throw away all the sweets and replace them with vegetables. But the second type of living is never 100% present. At some point, I go back to my “normal” consumption of chocolates and puddings.

After all, we are not robots. No one expects you to be perfect and weigh the same pounds throughout your whole life. Nor you should expect this thing from yourself.

Embracing imperfection can be a real game-changer when you are approaching tasks and life in general. It’s OK to make mistakes. It’s OK to be wrong. It’s OK not to be OK.

However, as semi-rational people, we should consider some of the things that can usually lead to a really bad future and avoid doing these things.

Here’s another example of time inconsistency that is really important for the future self:

Based on a study, people in their 60iest, often wish that they have saved more money when they were younger.2 However, years earlier, when people were introduced to the option to save, they generally do not care much about saving and instead spend most of their cash.

A lot of people nowadays know that general retirement plans are offensively low. But when we get our salary now, and we are young, we quickly move our money in another direction. When older, however, if offered the choice to re-live our lives and invest more, we will surely choose the latter option.

The outcome is the same – saving money – but it’s observed at different points in time.

To explain this even better, let’s look at the concept a bit deeper…

Why is it so hard to avoid time inconsistency?

Investing and letting your money compound seems easy on paper. You just pick a broker, an ETF, for example, and you wire a certain amount of money each month.

This is the oversimplified version of investing, of course.

If we take a closer look, we can see why we are likely to not follow our initial plan of saving X amount of money every-single-month.

If we observe a one-year period, this is how many times we need to invest – 12. But within these 12 events of sending money to your broker, we are different people with different agendas and emotional levels.

Picture showing that we need to invest 12 times for 1 year if we want to save for retirement
How investing looks in a 1-year period.

Probably in January you were laid off from your job and investing money doesn’t seem like a feasible option. Or, during April, you decide that surprising your wife with a fancy new car, or a trip around Europe, is more important, and saving some cash should come secondary. And while these events may not prevent you from saving cash for good, they surely hurt the final sum you might get after 30 years.

A picture showing the decisions we are facing each month with the money we firstly allocated for investing. We have 3 options: go on vacation, spend money on fun things, invest.
Time inconsistency makes us doubt our initial decision to invest each month.

For example, $20,000 for 30 years at a 6.75% interest will end up earning you $141,927. Only $5,000 more, for the same period and the same interest rate, will compound to $177,409. Or in other words, $5,000 more will earn you $35,482 euro for 30 years.

Of course, you rarely think about this when you decide not to save. You think about the immediate benefit you will get. However, when you get older you’ll hate yourself for not saving a bit more every month. But when you are younger, you have totally different concept about how you should allocate your cash.

This same theory can be observed in everything we do.

Spending an hour a day learning something new will lead to mastery in two years. However, this means that daily we are preventing ourselves from playing video games. And playing video games is fun now, studying is not.

It’s easy to say that we want to learn how to build sites using HTML and CSS, for example. But it’s hard to want this consistently over a course of 1, 3, or 5 years.

This brings us to the following:

What Are Usually The Reasons Of Time Inconsistency in Our Daily Lives?

Simply put, our inability to realize that we are different people throughout the different periods of our lives is the main cause of the problem. We don’t live in the days, nor in the hours. We live in the precious moments that happen to us at this very moment. And these little moments, how we feel and what the people who surround us are doing, often force us to do things we are not particularly proud of.

Probably you wake up early in the morning to exercise. Let’s say you are a motivated fitness guy who is always eager to move. But imagine having to go to a conference in the other part of the hemisphere. Suddenly, your whole agenda changes. Not only that you are in a different city where you don’t know if it is appropriate to run alone at 5 AM, but you also have a completely different daily routine. And probably you are unable to find 15 minutes of free time to do some sort of exercise because your roommate is always snoozing.

What I want to say is that you should be really strategic about the plans you adopt in your life. Don’t simply state, “I want to exercise more.” But also consider when and how you will exercise. And, when and how you will exercise when things are not going according to plan.

Or as the author of the book Thinking in Bets, Annie Duke writes, “real life is like poker, not like chess.”

In chess, we can see what’s happening. If we are really good at math, we can calculate all the possible moves and win. In poker, you have to consider not only the cards on the table – what’s visible – but also the cards that are not visible. But above all, you need to take into account something far less easy – the emotions of the people that are trying to deceive you and also constantly temper your own emotions when you have a high card.

The hardest part is probably impatience. Not only in poker, but in life in general.

In our hyperactive and super-connected world, I’m just a click away from entering a zone full of carefully designed animations that can make me feel really good at the current moment. I can play free video games, chat with folks from various continents and engage in workshops till it starts to hurt.

Having easy access to the world’s best stores is surely a blessing. But having the same access when you are in a bad mood can quickly evaporate half of your life savings.

So what’s the solution to the time inconsistency problem?

I’m glad you’ve asked.

But let’s first read this story: Odysseus and the Sirens.

Curious to hear the Sirens’, but knowing that their songs are devilish, because he was previously advised by the sorceress Circe, Odysseus tied himself to the mast of the ship. And, as told by Homer, he ordered his crew to stop their ears with wax so that they were deaf to the Sirens.3

Thanks to these prior acts, the whole crew sailed away unharmed.

The moral of the story is this: Recognizing that in the future you might behave irrationally can save your life.

Carefully thinking about how you will execute a plan, what are the potential obstacles, and how you will act in times of distress, can prepare you for the problems you will eventually face. This type of strategic thinking is called a commitment device. We create a set of rules that we follow when our plan doesn’t go according to plan.

A commitment device is a way to lock yourself into following a plan of action that you might not want to do in the future but which you know is good for yourself.

When I was a kid, my mother used to lock me in my room until I was ready with my homework. This was her way of placing me in a situation where there is no alternative. Similar to what Chinese military general Han Xin ordered to his soldiers. He placed them with their backs to a river to ensure they would fight.4 While my mother is certainly not Han Sin. This helped me a lot in math when I was young.

Nowadays, I impose similar restrictions on my own. I don’t use social media not because the content there is bad in terms of quality. But mainly because I want to prevent myself from entering activities that are mostly wasteful. You know, losing myself in the never-ending feed of filtered photos and endless rabbit holes.

The core idea of the technique is to add constraints in the way you behave so you can avoid akrasia (acting against one’s better judgment).5 Or in other words, not let your emotions dictate your actions and always think rationally before making a decision.

But enough facts.

Here’s a simple 3-step process that will help you lose weight. But it’s not only about weight. These 3 techniques apply to everything related to avoiding the time inconsistency problem:

  • Create obstacles: If you want to lose weight, prevent the damaging behavior by adding obstacles. Don’t buy sweets. Make it easy to exercise. Fill your refrigerator with healthy food. Set a rule to avoid eating sugary things after 6 PM.
  • Public humiliation: Stay publicly that you want to stay healthy. Tell all of your friends that you are getting healthier. Discard all current clothes and buy clothes in a smaller size.
  • Fight with your back against the river: Leave no other choice. Go to a distant villa where there are no shops around. Where you’d have to prepare your own meal. Where there is nothing else to do other than to exercise.

These are the essentials. And while different techniques can be used. The main differentiator remains how you handle your emotions. The main goal should be to find a different way to act when you feel down, unmotivated, and misunderstood. Instead of eating when you are bored. Instead of playing video games – as most people do. Find better, productive alternatives.

In sum, when you decide to do something, plan ahead. Recognize that in the future you will be a different person with different wants and needs. Think about how you can act in these situations to stay consistent in your actions.

This simple pre-planning stage will help you reach your goals and prevent inconsistency.

Some Closing Thoughts

We are irrational now, but we think that we’ll be rational in the future. That’s why we outsource the current important decisions for our future self to handle. And when the future becomes the current reality, we feel regret for not being more rational in the past. That’s time inconsistency. Our ever-changing self in the ever-changing world.

Knowing this concept will allow you to understand that you will be a different person in different periods of time. That’s why it’s important to save money now, not put it off for some future moment. Because in the future, you will be a different person but at least several things are certain: you will be less mobile, less desirable for employment, and have less time for your investments to compound. And that’s just one example.

Pretty much everything we do now will matter at some future moment. Even going through this article.

If you are still here and reading, it means that you’ve spent around 15 minutes going through the idea. Some might consider this a waste of time. Others, might use this simple concept, apply it in their lives, and reap the gains a couple of years from now.

Hopefully, the content did serve you well, and you will eventually make changes in your current actions that will lead to a brighter future. If it did, I’d love to hear from you. Contact me using the form here.


  1. Our thoughts create our reality. What you think you become. This is based on the studies shared in the best-seller Emotional Intelligence.
  2. “We would have saved more and started earlier,” are common comments by older people. From The Five Biggest Millionaire Regrets
  3. According to Wikipedia, Homer was the presumed author of the Iliad and the Odyssey.
  4. When there wasn’t a way for his troops to flee, they fought fiercely and won the battle of Wei River.
  5. Also called Weakness of Will. Lack of self-control or the state of acting against one’s better judgment.
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