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Lesson 5b: Delayed Gratification

Objective: Learn how to become better at saving money

Investing is about delayed gratification, both in terms of waiting while you save enough money to invest and waiting for your investments to pay off.  Yet, waiting for results is hard to do in our society where instant gratification is a way of life with things like FedEx, fast food, and instant messaging.  The advantages of being patient and waiting (and saving) can be seen even in the early stages of childhood.  In a study by Stanford University, children were given one marshmallow and were told if they waited to eat it until the instructor came back, they would be given two marshmallows.  Only, 1/3 of the children waited.  The study showed that for the children that waited, they had better health, higher incomes, and more successful marriages when they grew up compared to the other children.  Delayed gratification (and investing) can benefit you in the same way.

The need for investing is becoming more important because today's workforce is taking on more responsibility for their retirement as Social Security and corporations pension plans are being cut back.  And, as more responsibility is being place on individuals for their retirement, future retirees are however more likely to live for today and not for tomorrow.  According to the Employee Benefit Research Institute, 59% of today's employees are more likely to financially live for tomorrow while 30% of the workers are more likely to financially live for today which doesn't sound that bad.  However, when asked to compare themselves to 5 years ago, 51% said they are more likely to financially live more for today.  With the baby boomers getting closer to their retirement age, is this the right trend?

So how can you become better at saving money?

Understand that there is a future payoff for delaying your reward.

Studies have shown that with higher levels of retirement education, a participant is more likely to increase their 401(k) contribution level.  So review again the retirement section and investing section on the need to save.

Know that your situation can be different.

Part of savings is our internal dialogue.  It is a knowing that you can save with what you have.  Many put off saving until their finances get better, thinking that they are already stretched too thin.  It is knowing that you can learn to save with what you have now rather than using reasons on why you can not.  List the reasons why you believe you are not able to save.  Look at these reasons and see if you can make a counter argument.  If it appears hard to make ends meet, find others who you can use as examples of how to save.  For example, you can read about ordinary people who saved millions

Change your thoughts about material possessions.

Do you feel a need to have things in your life?  Many prosperity books encourage having abundance, having what you want and deserve.  It is about getting a bigger house, nicer car, and extravagant vacations.  And, when you have a bigger house and nicer car, will it be enough?  Or, will you then want a house on the ocean?  There are others who feel that they are just getting by with what they have today.  They live paycheck to paycheck, no matter if they earn $25,000 or $75,000. 

It is about changing thoughts of possessions (things like my sports car or my dream house) into objects (a car that gets me around and a house that shelters me).  Possessions are things that you reach out to grab for and then hold on tightly to.  It is harder to give up a possession.  Objects are things that come in and out of our lives without attachment.  It is easier to exchange a luxury car for savings if you are not attached to the luxury car.  Yet, this means overcoming marketing and society pressures that take objects (cars and houses) and make them possessions that we must have today.  Do we really need that 4,000 square feet house when our parents grew up in a 1,500 square feet house?  Do we really need the fuel-inefficient luxury SUV instead of a practical sedan? 

Distinguish between true wants and needs.

Many prosperity courses teach creating what you want today.  So, why am I talking about delayed gratification which is about tomorrow?  What delayed gratification is about is understanding that you have all that you need in this moment.  Many people acquire possessions to try to fulfill a need today.  Yet, many purchases are about trying to cover up a perceived need of the ego (the bigger SUV).  How many people without children do you see driving down the street with an SUV or minivan?  Was this purchase out of need or perceived need created by the auto industry (buy it for its ruggedness and safety)?

Delayed gratification is about letting things into our lives at the right time instead of trying to grab at the latest fads propelled by excellent marketing.  It is about if a nice car comes into your life that is fine if it does not come at a cost of mortgaging your future just to fulfill a perceived need. 

Saving for retirement is not only about knowing your investment options.  It is about being objective about satisfying our instant wants and needs and living for today. 

Exercise: Review some of your recent purchases. 

  • Were these purchases out of need or a want?
  • Did you review the impact the purchase would have on your savings goals?
  • How much did marketing play an impact in your purchase?  Be honest because most purchases are influenced by marketing to a certain extent (marketing creates and enhances the need to have it).
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