We live in the world of everything ‘Instant’. We can live off instant noodles and coffee. We like something that we see and can have it delivered to us by ordering online. We can acquire the latest gadgets as soon as they are launched or sometime before they are launched. We need not wait for our salary to be credited to our account to buy something. We can always buy ‘NOW’ and pay later using credit cards.
This is very different from the earlier generations who knew how to wait. They had to wait for a letter to get news from their dear ones. They had to wait till they had saved up enough cash to buy a luxury item. Today we really do not want to wait or even do not have the patience to wait for anything. Of course, technology has helped to speed up things and it has many advantages. But has it improved the quality of our life. We just keep doing things to get short-term satisfaction, but this results in lesser success when it comes to long-term goals, feeling of satisfaction and balance.
It is more so in the case of financial goals. You want to buy the new car launched even though it is not a necessity but do not think of the long-term financial needs. You want to go to the fancy restaurant and blow up a lot of money which could be saved for a rainy day just because your neighbour went there. You buy some financial products without much thought just to save some tax. You are satisfied in the short-term as you feel good with your latest purchase or feel proud about saving some money. But will this matter in the long-term finances. The car will be expensive to maintain – the EMIs will become a burden. The tax-saving product might not fit into your investment plan leading to financial imbalance.
Do you think you are more contended than people of the earlier generation with a similar lifestyle? Mostly the answer would be “No” considering the stress and discontentment around. What can we do about this?
They say, “Great things come to people who can wait.” We need to understand the concept of delayed gratification. It means selecting something that will stop you getting something instantly for the satisfaction of getting something better later. This will help in our personal finance and even other aspects of life.
How do we embed delayed gratification habit in our life:
1) Strike a balance –
It is good to have a balance between instant gratification and long-term satisfaction. You might want to spend on some things which you really like for short-term gratification and save the rest for long-term goals. If you keep stopping yourself from spending on what you really like, there can be negative consequences. You might feel low, inferior to others and if it gets to you, you might let loose and really go overboard on expenses completely disregarding long-term goals.
2) Pay cash –
When you are tempted to buy something which is not a need, try to pay by cash. When you see real money being spent, you might think twice the next time. You would think more logically when making saving/spending decisions.
3) Create a Financial Plan –
It is of utmost importance to create a financial plan. The plan will have the details of income, expenditure, assets and liabilities. It will have the short-term and long-term financial goals. It will have the steps, investments to be made etc. to achieve the goals. This will help put things in perspective and when you are tempted to satisfy your wishes instantly, you will check if this spending fits with the plan or not.
4) Manage Investments better –
You have some mutual funds or blue chip stocks with you and the stock market is on an upward trend. You might be tempted to sell them for instant gratification. Have you thought what would you do with the sales proceeds? If the stocks have more potential, in the long run, it might be better off to hold on to them which might not give you instant gratification but the delayed gratification might lead on to higher profits. Similarly, you might be holding on to investments which are not performing well and do not have the potential to give you good returns. You might be holding on to them to have a false sense of comfort or to avoid admitting you made a mistake. It is better to sell them off and cut your losses. You would feel bad at making a loss but in the long run, it is better for your finances.
5) Avoid Temptation –
It is difficult to avoid temptation. We are tempted to buy things, go for ‘sale offers’ at malls and eat and drink in excess. We are tempted to have what others have. These things make you feel good in the near term but are not good for your long-term finances. You have to think rationally and responsibly before making any decision to spend or save. Instead of giving in to impulse purchases, you could take some time out and list the reasons for the purchase. More often than not, there will not be a concrete reason to make that purchase and you would be convinced not to buy.
6) Education and Career –
You have to plan your education as per your interest, scope for the future and financial means. You might join a course because your friends have enrolled in it and you fear the unknown in a new or different course. You might feel comfortable for some time but then if the course is not something you enjoy or something that will use your potential, it is a waste and it will affect your future life in many ways. Similarly, you should choose your job or income opportunity with careful thought. High paying jobs are not the best necessarily. You should look at various aspects like the company profile, your career path and potential in the chosen subject area. This will ensure that long-term career is taken care of.
We do not think of the long-term finances when we make impulse decisions on buying and selling. It is important to keep an eye on the long-term financial rewards and make sure that short-term gratification does not mess up our finances.
Must share – how you hold your horses…