In 1972 a Stanford University Psychologist conducted a famous experiment on children to test their willpower. This experiment was called the Marshmallow Test. The basic idea was the scientist would place a small treat in front of the children and told them if they left the treat alone for an undisclosed period of time they would receive a double dose of the treat. The experiment studied delayed gratification and the methods the children would use to create the patience to earn greater rewards. The results found that the longer the children would wait, the greater success they would find in life: success such as SAT scores, educational attainment, body mass index, and other success measuring metrics.  

The kids who successfully held out for extra treats displayed that they valued greater rewards that they would receive later more than the lesser reward they could receive immediately. The kids who failed showed they lacked the self-control to have a greater benefit later. This type of behavior could be associated with activities such as smoking, drinking, obesity, or gambling. All of those activities provide a short-term benefit with a long-term sacrifice or loss. Valuing the immediate reward over the long-term benefit is termed temporal discounting. That behavior discounts the value to be had later over the instant gratification of reward now.

We are all faced with these choices on a daily basis. For example, being offered digital credits from Amazon for delayed shipping of your order. But even the professionals face this issue. Most of my financial advisor friends recognize this behavior in themselves and have advisors of their own to help them better prepare for the future. Acceptance of this issue is the first step. A recent study found that participants who had a greater appreciation for their future goals had a much higher savings rate and financial health. 27% greater than their shorter-term thinking counterparts.

So how do we start acting like the patient children?

My wife thinks I am a crazy person, but truth is my method works for me. I go through most of my days thinking about how I could benefit my future Ryan. For example, if I have something I can’t forget for a meeting the next day I’ll put it in my car so when I rush out the door the next day it is sitting in the passenger seat and not forgotten. Thank you, Ryan from the past. When I get my paycheck, I immediately push it into my long-term no-touch savings account. Even before I pay my bills. I have to pay future Ryan first and do the right budgeting now to force myself to save enough. Thank you, Ryan from the past. I told you it sounds crazy, but it does work.

Another method is listed in this article. If you have a hard time saving for the distant future, say retirement that is 10, 20, 30 years away, start small and work your way up. Set a goal to save X amount for the current month, and if you hit that goal, reward yourself. Then push it further. Go for a 3 month goal, then 6 months, and so on until you reach an understanding of what it takes to think about your future goals in the right mindset. Before long it will become second nature.

My final suggestion is to work with a financial planner. It is exactly what we are trained to do. Behavioral training for your financial health is a major component of financial planning and could provide very satisfying results for your mental health as well. So send me an email or book a call so we can start planning for your future self.

Fiduciary Mission

At Integritas Financial, we are committed to providing fee-only, fiduciary financial planning services that are tailored to the unique needs of young professionals, particularly millennials. Our experienced planners work with you to develop customized financial plans that address key areas such as estate planning, trusts and wills, retirement, workplace benefits, education funding, student debt, and buying a house.

We believe in transparent, client-focused service that puts your financial goals at the center of everything we do. As a fiduciary firm, we are dedicated to acting in your best interests, and we never sell products that charge commissions to clients.

Our goal is to help you achieve a stable and prosperous financial future by providing comprehensive financial planning services that are tailored to your individual needs. Whether you're just starting out in your career or you're already well-established, we can help you navigate the complexities of financial planning and create a roadmap for success.

Ryan@if-money.com