In Parts 1 and 2 of this mini-series, we introduced the concept of instant and delayed gratification, and how it has possible implications on our decision-making and finances.
Join us today for the 3rd and final part of this series, where we discuss practical steps on how to improve our financial self-awareness and avoid the pitfalls of instant gratification. (If you have not read Parts 1 and 2, it would be great if you did to benefit best from this series.)
Financial prudence seems simple in theory — spend as little as you can, save as much as you can, and invest as wise as you can. But like we said, that’s in theory. We need to admit that as humans, we have emotions and vulnerabilities, and sometimes our behaviours can differ from our original intentions.
As we mentioned in the previous articles, the solution to better financial decision-making lies in tipping the scales in being less emotional and being more numerate and rational. When we are better aware of the pitfalls of instant gratification as discussed, it will aid us greatly in the plans we make to improve. To improve our chances in mastering delayed gratification, here are 4 steps to follow.
Step 1: Get Your Priorities Right
A big reason why we struggle with delayed gratification is that the future does not seem as real and tangible as the present. We must put effort into imagining the greater rewards we want to wait for, if not they will seem vague. We need to put our brains to work — visualise and extrapolate the circumstances vividly in your mind’s eye.
Consider, to the point of iron-clad conviction, our financial goals in the order that we deem most important. Ensure that our basic and foundational needs are settled before tackling the fancier “good-to-have” ones. Determine for ourselves, if retirement and insurance should take precedence over the fancy sports car, or if our children’s education is more important than our current spending lifestyle.
Step 2: Materialise Your Plans
Writing down our goals and plans are a great way to make our thoughts and intents tangible, and will help much with decision-making when the rubber meets the road. Detailed lists and comparison tables can be fantastic. Spreadsheets are extremely helpful to do calculations especially in extrapolating numbers like compounding interest. Contextualise your goals, work in the details, and be sure to track them.
Step 3: Never Rush
Patience is key. Whenever we are faced with a decision, don’t be pressured to act on instinct. Wait. Take time to let the heat of impulse diffuse. Always take a step back and consider different perspectives and alternatives. Refer back to the plans we have made earlier, instead of being reactionary.
If we find ourselves struggling with this, it may mean our convictions and plans are not strong enough to affect our behaviour. Do repeat steps 1 and 2. Be humble and bounce our plans off with people whom we trust and know have our best interests at heart. They could offer a different perspective and prevent tunnel vision.
Step 4: Commit
Put your money where your mouth is. By putting your savings and investment plans into action, it forces you out of procrastination to be accountable. Take that step to start the realisation of your financial goals by speaking to your financial advisor or wealth manager. The earlier you do this, the sooner you reap the benefits of time. (Remember the effects of compounding interest we explored in the quiz in part 2?)
In conclusion, let’s go through this checklist to see if you have the main areas covered.