The Shock of the New
There is change and then there is the velocity of the change. In 70s, Alvin Toffler coined the term “Future Shock” to describe the disorientation and “shattering stress” induced by too much change in too short a time. Toffler argued that rapid technological and social shifts would shrink the duration of our relationships with our surroundings.
These changes impact our social & work lives, and without a precedent to follow, there are simply no off-the-shelf fixes.
These changes also impact our finances. We are witnessing their impact on our ability to earn consistently, increased consumption and lack of traditional support systems.
Our ability to earn consistently
Perhaps the most profound impact of this acceleration is on our ability to earn consistently throughout the career. The rapid change in the employable skills means that there will be constant movement to develop new skills that may require career breaks. The World Economic Forum’s Future of Jobs Report 2025 states that an average of 39% of workers’ existing skill sets will be transformed or rendered outdated within the next five years. We need to be prepared financially for career shifts and dry-spells.
Avenues to Consume
The changes are impacting our consumption patterns too. Availability of ever newer versions of electronic gadgets, cars and experiences at easy credit is increasing the velocity of consumption. We consume more and dispose faster. Studies show that the average replacement cycle for a car has dropped to 4–5 years, down from 7–8 years just a decade ago. This is increasing the demand on our finances, willingly and unwillingly.
The Support Net
The era of paternalistic employment—where the company looked after our lifelong financial well-being through pensions and job security is no more available.
The traditional joint family has evolved into extended family, which is now rapidly fragmenting into nuclear units. This movement is forcing a shift from a collective financial-safety-net to individual self-reliance even in old age.
How can we be better prepared?
These changes are there to be accepted. They may look overwhelming and that may be a reality.
Here are some changes that can ensure that finances remain “Future Ready.”
1. Accepting Ownership
We need to accept complete ownership of our financial life. From budgeting, to basic understanding of investments, to having a savings rate to building a corpus for key life goals…the responsibility sits with no one else but each one of us individually. This also means we need to be aware of risks and opportunities that can impact our finances.
2. Extend Employability- Focus on Lifelong Learning and Skill Upgrade
The secret to a long, profitable career is playing to our strengths—but we can’t set it and forget it. To keep our income steady in a changing market, up-skilling is a must. It’s wise to treat mid-career education as a formal financial goal, building a dedicated fund so we can afford to take a break and level up our skills without stress.
3. Save More
Saving more is the single most effective way to prepare for our future goals. Shift the financial mindset from Income – Expenses = Savings to Income – Savings = Expenses. By prioritizing our future-self first, we turn wealth-building from a choice into a habit.
4. Control Lifestyle Expenses
Exercise control over lifestyle inflation and avoid becoming ‘hooked’ on a high-cost way of living without budgeting for it. Our standard of living should not get impacted by any volatility of income. Downgrading a standard of living can be painful. Psychology shows that we experience the pain of a lifestyle downgrade two to three times more intensely than the pleasure of an upgrade. Draw a line between discretionary goals/expenses and our long-term critical goals.
5. Strategy Over Luck- A Financial Plan
A formal financial plan is a must. It helps focus on the long term; it gives a direction; creates a budget; and reduce uncertainties. It can give clarity on achieving our critical and discretionary goals. A good financial plan considers multiple scenarios and takes into account our capacity and capability to take risk. Our capacity which in itself is an outcome of the expected volatility of earnings, our savings and our expected expenses.
Can a financial plan co-exist with uncertainties?
Certainly! Financial planning is not a one-time activity. A plan has to be regularly reviewed and new possible changes need to be incorporated. It should be used as an effective tool to test the impact of new changes on our finances, such as early retirement or a career track change.
Being future ready requires us to take small-smart-steps. A plan, a budget and a determination to execute & change when required.
