Over the years I’ve made more wrong financial decisions than I can count. As I look back on these decisions there’s a common denominator that’s part of each of them. Can you guess what it is?
There’s a saying I've used from time to time, “I’ve already made up my mind, don’t confuse me with the facts.” Truthfully, when I’m in the heat of spending on the thing I want, the last thing I want to do is stop and rationalize the decision. My desire is to HAVE it! I don’t want to REASON my way to a decision, I just want the satisfaction of getting what I want.
Can you relate?
Have you ever felt the rush of getting that thing you really wanted? It feels good and it's gratifying. Unfortunately, when spending damages your finances, the decision is always followed by guilt, shame or regret. It can also have long-term negative consequences. Being able to exercise delayed gratification in spending is an effective way to improve your finances.
Understanding Delayed Gratification
You may be familiar with The Marshmallow Experiment, a study on delayed gratification done by Stanford professor and psychologist, Walter Mischel, started in the 1960’s. The study involved more than 600 children between 4 and 6 years of age.
Children were individually taken into a room, void of distractions, and offered a marshmallow, which was placed in front of them. The children could eat the marshmallow, but if they waited for fifteen minutes without giving into the temptation, they would be rewarded with a second marshmallow.
A small number gave in and ate the marshmallow immediately. Of those who tried to delay, only one third deferred gratification long enough to get the second marshmallow.
Several subsequent studies of these individuals over the next 40 years proved that those who delayed gratification enjoy numerous advantages. They were more educated, had a greater sense of self-worth, were able to manage stress better, and were less prone to addicted behavior.
This study and several like it, prove that our ability to delay gratification and exercise self-control has a significant impact on our lives. Whether you’re trying to lose weight, overcome a bad habit, or get your finances in better shape, being able to exercise self-control is directly connected to your success. The ability to overcome the temptation to spend in a moment when your desire is peaked is a crucial part of achieving financial success.
5 Steps To Improving Your Finances Through Delayed Gratification
1. Identify Your Values
When you know your values, it’s easier to exercise delayed gratification because you’re not just saying “no” to something you want, you’re saying “yes" to something of greater value. You become the protector and defender of those things that are of most value to you and your family.
2. Set Clearly Defined Goals.
Know what you want to achieve. Write down your goals and you're 42% more likely to achieve them. When what you want is clearly understood, you’ll be empowered to delay the momentary gratification of buying something in exchange for the benefits of reaching your goals.
3. Create a Plan
The simplest way to overcome the temptation to spend on the wrong things is to let the financial plan guide your spending. A budget will help you make decisions that are in line with your values and your financial goals.
4. Prioritize Your Spending
There will always be a limited amount of resources and unlimited opportunities to spend those resources. By prioritizing your spending you’ll avoid unwise and impulsive spending, and make the best use of the resources you have.
5. Reward Yourself
Delayed gratification doesn’t mean you don't spend money. It means you delay spending it on something now so you can enjoy spending it on something better later. Life is meant to be enjoyed. Don’t delay gratification indefinitely. Make sure to include rewards for yourself and spend some of it on fun stuff.
What ways have you been able to delay gratification to improve your finances or your life?