Everyone wants to know some new tactics or hacks to help improve their finances. There are always apps and programs coming out for budgeting and tracking our money and net worth. Many of these tools are wonderful and they work great, but tactics and tricks can only take you so far. Many of the most successful and wealthy people alive today don’t have any use for such apps or hacks. That’s because they have mastered the values that embody success. One of these values, and the one I believe leads to the most financial success, is delayed gratification.
I like to think of our financial status as a tree with three main parts: the roots, the trunk and the branches. The branches of a financial tree are the various checking, savings, business and investment accounts that we use to get our money. The trunk is our ability to budget, which needs to be sound to ensure our money is going where it should be. And the root of the tree is the virtue known as delayed gratification, the ability to hold off on small wins now to hold out for possibly much larger wins in the future. Most people focus on the branches, looking for little things we can do here and there to hack our finances. Sometimes they work and sometimes they don’t. If the roots and trunk of our tree are not steady, trying to improve the branches will not do too much.
The virtue of delayed gratification is present in many facets of life. Many religions advocate living a good life in this world for the promise of a greater life after death. In school it’s usually a good idea to study regularly instead of spending the day with video games so you can ace that test and enjoy the video gaming afterwards stress free. And in our financial life there are numerous ways where delayed gratification can lead to a much bigger payoff.
There are 3 major ways that delayed gratification can lead to financial success:
1. Saving for retirement: This is one of the penultimate examples of the benefits of delayed gratification. Young people starting their careers or businesses usually don’t have retirement on their mind, but they should. Retirement is one of those few things that is almost guaranteed to happen in life. Eventually we get old and aren’t able to work as hard as we used to or we just get tired of working hard week after week. Many people are forced into a retirement situation because of disability or health reasons. Any of those situations is pretty likely so it is imperative to save something, especially early on. This can usually be done relatively painlessly with automatic contributions into a 401k or an IRA. There are many retirement calculators around the web that can show you how much you can end up with based on different rates of return, but it is important to know that WHEN you save (earlier the better) and HOW MUCH you save (the more the better obviously) are the main factors determining how much money you will have when you can’t or don’t want to work as hard anymore.
2. Putting in the work to start a business: Starting a business from the ground up is a perfect example of the importance of delayed gratification. Every business needs a strong foundation and this work is done early on without much reward. But the payoff can be great if you stick to a plan and do not take any easy ways out. Just like a building that has a faulty foundation will eventually collapse when there’s an earthquake, a business with a poor foundation will most likely fizzle out when times get tough financially.
3. Studying a little longer for that lucrative career: Many people who take the prerequisite courses in college for medicine, optometry, dentistry, pharmacy or any other potentially lucrative medical profession don’t actually go on to the respective professional school. There could be many reasons such as poor grades, family situation etc. that would prevent someone from moving on to professional school, but I know of plenty of people who entered the job market with a bachelor’s degree just because they didn’t want to spend more years studying. They wanted the payoff from their bachelor degree right away, despite the fact that they would most likely be better off financially if they studied diligently for a few more years and got their professional degrees. Forgoing the payoff of a bachelor’s and choosing to go further with your schooling is another way delayed gratification can greatly pay off.
These are just a few of the many situations in which delayed gratification would be the wise decision. There are a ton of examples in the world of finance especially. Everyone has some example in their life in which delayed gratification was the best financial decision, so please share in the comments below.
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