I was watching a TED Talk by Joachim de Posada on a study that was done several years ago with a group of four-year-old children: the group of kids was each given a marshmallow and told if they could wait 15 minutes before they ate it, they would receive another, if they ate it before the time was up, they would receive nothing. The moderator then left the room to see how they would react. Two out of three kids ate the marshmallows before the time was up.
A follow up study was done 15 years later and it was found that all of the kids who didn’t eat their marshmallows before the 15 minutes was up had enjoyed reasonably successful lives up to that point: good grades, further education, well-adjusted socially and trouble free. The two thirds who had eaten their marshmallows before the 15 minute period had experienced considerably more challenge in their lives over those same years.
This may have been a simple experiment but the results were telling. For us in the real world, whether working to accumulate assets for retirement or determining the best way to manage our wealth in retirement, our ability to delay gratification will have a major impact on our quality of life.
The point isn’t to draw a line and divide between those who have been disciplined and those who haven’t; we know inside when we’re making the choices that are best for us. The point is that we must be honest about why we’re making these decisions – and accepting of the impact those decisions will have on our present and future lives.
Lotteries and large inheritances rarely form a part of most people’s retirement nest eggs; generally speaking we tend to underestimate the cost of our lives and overestimate the sources of income we have to pay for them. Decisions about spending, saving and earning are too often based upon overly optimistic expectations. As a result, many people struggle in their retirement years, not necessarily because they didn’t have enough or made all the wrong choices, but because things turned out very differently than they expected.
The key is to understand what you really want for yourself in life and what you can afford. Don’t sell your long-term goals out for the benefit of short-term gratification; at the same time, don’t sacrifice all your present moments for a future based on someone else’s objectives. What you need to do is become really clear about the things that matter most to you – both now and in the future; once you’ve done that, the right decisions are easy – they might not be fun, but they’re easy.
So the next time you decide to go to Mexico on your credit card, buy the Vita mix machine at Costco or choose the fully loaded vehicle rather than the base model, stop for just a minute and think. Make sure another all-inclusive is what you really need for your sanity; know you’re committed to a life of smoothies, homemade nut-butters, frozen yogurt desserts and soups; and be sure that Sirius radio and a built in GPS are things that you really need to be happy. If not, save the money and be confident knowing that it’s going towards something more important, something that really matters: your future.
Read more Navigating Your Wealth articles
- Euro debt woes re-emerge Jul 17
- Why buy money market funds? Jul 3
- Are we there yet? Jun 26
- ECB rolls out stimulus measures Jun 12
- Estate planning isn't just for the wealthy Jun 5
- On mixing business and personal May 29
- US stocks pull back from records May 22
- Unintended consequences May 15
- Don't talk to me about insurance! May 8
- Between a marshmallow and a hard place May 1
- On living and dying Apr 23
- Valuation fears grip markets Apr 16
(Click for RSS instructions.)