How are you feeling about your New Year’s Resolutions? Is it going well or are you already beating yourself up that you lack willpower and discipline? Are your finances, your house, and your diet under control?
The marshmallow study, as it has come to be known as, looked at kids and their choices. The kids were put in a room and told they can have one treat now or a bigger treat later, if they wait. The kids’ responses were noted and the study continued over time. The researchers concluded that the kids who could wait for the bigger treat, i.e. delay gratification, were more successful later in life. The study made it seem like it was a character trait that led to this success and that if you didn’t have that ability to wait, well, you would not be as successful.
But there’s more to the story than that, and it gives hope to all us who struggle with waiting, whether it is eating another potato chip now rather being slimmer later or buying those shoes today rather than funding your IRA for your retirement later.
Three points need to be clarified, according to the author of an article* that seeks to dispel the myth of delayed gratification.
The first point is it wasn’t really about self-control:
“It turned out that kids waited longer when they were distracted by a toy. What worked best wasn’t …”self-denial and grim determination,” but doing something enjoyable while waiting so that self-control wasn’t needed at all.”
The second point is ‘sometimes it’s okay not to wait:’
“‘In a given situation…postponing gratification may or may not be a wise or adaptive choice.’ Sometimes a marshmallow in the hand is better than two in the bush.”
The third point is it depends on your past:
“The inclination to wait depends on one’s past experiences. “
So, how can you make Delayed Gratification work for you with regards to your finances?
Make it fun. Make it a game. If you are trying to save more money, be creative. Make a poster, fill a jar as you make progress, add a link to a chain that drapes across your windows, distract yourself from what you are giving up with positive reinforcement of what you are gaining. Give yourself some mini rewards along the way for long term goals.
Put as much of your savings on autopilot as possible. Then you are not distracted into spending money that you really meant to save.
It’s not all or nothing. Plan for setbacks. Most of has have competing goals of saving for our future (an emergency fund, the next car, retirement) and enjoying our life today. Strive to find a balance between all these goals. Sometimes it really is okay to spend today. Just understand the tradeoffs you are making. Having a financial plan in place can help you figure out the tradeoffs. And, if you have a setback, don’t berate yourself, find compassion and regroup. Try again.
Check your bias. Look at your own experiences. Be self-aware as you make financial decisions. I see this in many of my clients. The ones whose parents died young (before retirement age) are much more likely to want to enjoy life now, while they can. The ones who have parents that have lived a long time or had a long term care situation are much more likely to purchase long term care insurance. Be sensitive to leaning one way or the other too much, as in being so careful with your money you don’t enjoy spending it or spending it too freely to the detriment of your future.
*From “Dispelling the Myth of Deferred Gratification: What waiting for a marshmallow doesn’t prove”