It’s that time of the year once again. Most companies have ended their fiscal years and gave performance bonus to most of their employees. Employees were awashed with cash and they were very happy thinking of where to spend it since they worked hard to earn it. Are they going to buy new clothes, new gadgets, or go to their next vacation destination?
Most people have ‘one-day millionaire’ mindset. That is, when they got a windfall of money such as getting a bonus from their jobs or winning a lottery, they get to spend it all for instant gratification buying their wants. They always say to live life to the fullest because we’ll never know when we will die. They are trapped in the so-called Income Trap.
They keep on upgrading their gadgets, cars, and houses without how much family time they are trading off in order to earn the money they used to buy these things. It’s really sad when I see people who spend only the last one to two hours of every week day with the spouse and kids because they have to go to work early. They can’t even spend an hour in the morning with their spouse and kids because all of them have to rush to work.
These are all the repercussions of keeping up with instant gratification, of keeping up with the lifestyle that you don’t really need. In the end, they don’t have savings and they are trapped to work for the rest of their lives to earn a continuous income for their day-to-day expenses leaving no fund for their retirement during their golden years.
What if instead of buying new gadgets and cars that depreciate value over time, you end up buying assets that appreciate value over time?
Instant Gratification vs. Delayed Gratification
Just like a tree that takes time in order to bear fruits, your wealth also takes time in order to grow. Having said that, the best thing that you can do is to start as early as you can.
Given the two options below, which one would you choose? Option A is “sacrifice now and enjoy later” delaying gratification. Option B is “enjoy now and sacrifice later”. Given the same rate of interest, you would notice that for option A, a person who invested 35,000 for 6 years or a total of 210,000, he would have much than a person who started investing the same amount 5 years later and continued investing the same amount until the age of 50.
The “I Have No Time”
When you’re 20, you had your first job and lived the life you want. Gimmicks and everything…. Someone approached you and convinced you to start your savings and investments for yourself and start educating yourself financially. You said: “Maybe Next Time, I want to enjoy life!”
When you’re 30, you had your family, your wife and two kids. Someone approached you and convinced you to start your savings and investments for yourself and start educating yourself financially. You said: “Maybe Next Time, my budget is not enough for my family and myself.”
When you’re 40, someone approached you and convinced you to start your savings and investments for yourself and start educating yourself financially. You said: “Maybe Next Time, my children are going to college.”
When you’re 50, you are retired. Someone approached you and convinced you to start your savings and investments for yourself and start educating yourself financially. Again, you said: “Maybe Next Time, my retirement fund is enough for me.”
When you’re 60, you are now broke and you’re sick. You approached someone and said: “Is there something that i can do to start a business? I also need a savings for me and my family. That someone said: ” I’m sorry my friend but i think you’re no longer qualified. You should have started sooner.
Just like contests where we could win prizes, delaying gratification has also a prize at stake and that is a great future for yourself and your family. In contests, you’re a potential winner but in delaying gratification, you’re a sure winner!
It’s perfectly okay to live life to the fullest, but I believe recklessly spending most of one’s money for instant gratification to “live life to the fullest” is foolish. It’s common to hear those that are for instant gratification say that we never know when we will die.
On the other hand, what if we end up living up to eighty, ninety, or even a hundred years old and yet lived most of it in dire need of money? The key action is a balancing act where we still need to reward ourselves a bit without spending too much money sacrificing our financial future.