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Buy now or save for later?
Glenn Fairbairn
Director/Private Client Adviser
19 Dec 2017
When it comes to financial success one of the most successful traits to secure your financial future is ‘Delayed Gratification’.
Delayed gratification is a pretty simple concept. It means making a choice that limits the ability of getting something now, for the pleasure of being able to have something bigger or better in future.
The “marshmallow test”
Instant gratification was first researched about 40 years ago by psychologist, Walter Mischel, in what has become known as the ‘marshmallow test’. The experiment tested children’s ability, or inability, to curb their urge to have one marshmallow immediately (instant gratification) rather than wait and receive two marshmallows, as promised to them, at a later time (delayed gratification).
The researchers followed each child for more than 40 years and over and over again, the group who waited patiently for the second marshmallow succeeded in whatever capacity they were measuring. In other words, this series of experiments proved that the ability to delay gratification was critical for success in life.
This test still seems relevant today and maybe explains why credit card balances are ballooning out of control across the country, with many of us choosing to eat our marshmallow now, rather than wait and receive a greater reward in future.
The key difference between people with credit card debt and those without, is that the person with no credit card debt is likely to have mastered the concept of delayed gratification.
Those who wait and take control of their impulses will find themselves in a much better financial situation than those who don’t. Delaying expenditure until you have saved the necessary cash will save you paying 20+% per annum on your outstanding debt. In addition investing now, rather than spending, will enable you to benefit from the power of compound interest which Albert Einstein explained as the eighth wonder of the world.
“He who understands it, earns it…
he who doesn’t… pays it.”
– Albert Einstein
Delaying gratification ultimately helps you reach your long-term goals faster. So the next time you get the urge of an impulse buy, try thinking about the benefits you will receive in the long term, all for a little sacrifice in the short term.
At Hewison Private Wealth we strongly recommend the strategy of delayed gratification and having a long term investment strategy.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email [email protected] or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.