Between a marshmallow and a hard place

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.

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About the Author

Jeff Stathopulos, CIM, CFP, Portfolio Manager

Jeff is an advisor and partner with The Navigation Team at Scotia Wealth Management.

He lives in Kelowna with his wife Tanya, their two university bound daughters and their canine kids.

You can contact Jeff by email at [email protected]

Website:  www.yourlifeyourplan.ca

The Navigation Team

Scotia Wealth Management

This column is for information purposes only. It is recommended that individuals consult with their financial advisor before acting on any information contained in this article. The opinions stated are those of the author and not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member Canadian Investor Protection Fund.

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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