Have you ever heard people say, “I want so and so, and I want it now?” One of the big problems in life is that we have become obsessed with having instant gratification. We live in this instant gratification world where people want everything now. They don’t want to wait. They want fast food, fast cars, immediately want to be the boss etc. I am all for progression and totally believe you can have what you want. The key elements are that you need to be deserving, worthy and appreciative of those things. Like his uncle told him in Spider man, “With great power, comes great responsibility.”
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” ― Albert Einstein
To come back to the actual intention of this post of delayed gratification, people are seduced by the media and easy access to money, to believe they can have everything now. Part of the problem is that there is a distinct lack of financial education in our schools. The banks and credit agencies are very quick to loan the unsuspecting client money so that they can buy, example, the flashy car. Allowing them to pay it off over the next 5 years. The client is seduced with the low interest rates and “affordability” and of course the idea of being seen in that new item.
Now I totally agree that there are some things that may be needed to be bought on credit. A house as an example is probably something that most people would have to buy with a mortgage. Even cars for the most part are required to be bought with a loan. The problem is not so much the access to the finance in and of itself. It is that people want instant gratification. As older adults I think we realize that at some point you need to pay the money back and that of course you would have paid much more back than what you loaned in the first place. The young adult on the other hand still has this lesson to learn. Unfortunately by the time they are older adults and have learnt the lesson, they are now drowning in debt. Now the idea of having the best or newest is not as appealing as it was before.
Delayed Gratification Buys You More.
The last car I bought on credit was 19 years ago. (My car is not 19 years old. Lol) What I mean to say by this is that, we save for what we want and then buy it cash. If we can’t afford to buy something cash, then we don’t buy it. That includes holidays, clothes and everything else. This is not to boast. On the contrary, I share this to say that with delaying gratification, you can still buy what you want, but not need to pay interest on it in the future. In fact you can even afford to have more of what you want without paying some organization interest.
Just imagine you pay the following annual interest by paying on credit:
£60 interest on house insurance.
£60 interest on car insurance
£340 on car finance. (£10000 car at 3.5% APR.)
£240 on clothes. (£20 per month interest.)
£180 on that holiday. (18% on £1000- credit card.)
£180 on other credit card expenses. (Example buying presents for birthday and Christmas etc)
These alone come to £1060 per year in interest. In 5 years, that is £5300 and in 10 years it is £10600 in interest payments. Just to be clear that it will actually cost even more as prices go up and as such the amount of interest goes up. Imagine what you could do with an extra £1060 pounds per year or an extra £10600 every 10 years. With some coaching, this is very achievable.
Let’s play another pretend game. Imagine that your grandparents had a house that your parents inherited. Now your parents also have a house, so there are two in your family. You buy your house when you leave home. You are the only child and you inherit both those houses when your parents pass away and so now you have 3. (This is not a far-fetched story.) How is it that more and more people are living below the bread line and are struggling to pay their monthly expenses? In theory this person should have more money than they need and have 2 assists that produce them extra income each month. Yet people are getting more cash poor.
Delayed gratification marshmallow test.
There was a study done with children, called the “Marshmallow Test,” which was conducted by Walter Mischel and Ebbe B. Ebbesen at Stanford University in 1970. See Wikipedia for more details. Essentially they took kids and put them in a room. They told the children that they could have one marshmallow now, or if they waited they could have 2 marshmallows in 15 minutes. When they compared the children years later as young adults, the children who had resisted the instant gratification and waited for the 2 marshmallows, were more “successful.”
The wealthy know how this works and they use it to their benefit. Let’s teach our children about the compound effect and about delayed gratification so that they too may have more than the masses have due to the “need” of having it now. In fact by employing delayed gratification, you will actually afford to have even more than you thought you could.
If we taught our children financial education and about delayed gratification, then they will be able to live free from debt and the chains of the credit facilities that get ever tighter.
In fact I have a part time business where I make money on money and the compound effect works very well in my favour. I will be more than happy to tell you more about it. All you have to do is ask.
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