Disclaimer for this post regarding finance and instant gratification: We are not economists, financial analysts, psychologists, or anything like that. We just talk about finance a lot. More info here.

Whether you believe you have succumbed to instant gratification, I can assure you that at some point in your life, you have. We all have. Fair warning, this post might get a little nerdy since it delves into psychology a bit. If you’re one of those people whose paycheck always disappears the day after you receive it, then hopefully this post will give you ideas on how to make more future-focused financial decisions.

What is Instant Gratification?

Instant gratification is getting something right now or instantly. Instant gratification bias is where you care more about gaining something positive in the present more than about the negative effects that decision may have in the future.

If you’re over the age of 25, you are less likely to give in to the instant gratification bias. Why? Because your prefrontal cortex is fully developed, which is the impulse control center of your brain. When you’re a child, adolescent, and young adult, you don’t have as much impulse control. While lack of complete brain development is not an excuse to just run wild, it is harder for younger people to make more long-term, less impulsivity-based choices.

In addition to age, impulsivity and enjoyment of instant gratification are related to personality. I don’t really feel like digging through journal articles on that connection because I think I will definitely rabbit hole and end up never finishing this post. But for example, I am very analytical, hesitant to make decisions quickly, and think wayyy too much in ratio to my actions. So, I’m not very impulsive or care that much about instant gratification. Evan is the same way although sightly more I would say spontaneous than me.

If you are interested in finding out how impulsive you are, check out this impulsiveness scale, which is commonly used in the psych field to assess impulsivity. The scoring is pretty straightforward. I briefly skimmed through articles on whether this scale, called the Barratt Impulsiveness Scale has good validity and reliability. It seems to be both although I didn’t go too in depth.

How has Instant Gratification Become More Prevalent?

Technology has really brought instant gratification up. The two times where I realize I like instant gratification more than I like to admit are when shopping on Amazon and when using my computer. If I try to buy something at another store online, usually my first thought it “why is shipping going to take so long?” by “so long” i mean longer than 3 days. When I’m on my computer and it’s laggy, I get annoyed that my right click takes a whole 3 seconds to bring up a menu instead of 1 second.

First world problems.

How does Instant Gratification Affect Finance?

But really, technology especially in the area of commerce promotes short-sighted spending rather than long-term saving and investing. I can buy this shirt now and get it in a week or I can save that $20 and not really get any serotonin from that.

Everything is fast. Even if you’re not impulsive shopping online, just the speed of everything shifts your mindset to expect things quicker. If you want everything fast, now, and giving you results immediately, you’re going to be less inclined to branch out and do things like invest in real estate where you might not see a return for several years.

People often make decisions like choosing to have more spending money out of their salary now than contributing to their retirement account. They might buy an expensive car now just to have it sooner, even if it means higher car payments for the next few years. Living in the present is one thing, but living in the present and disregarding the future, is an issue.

What Financial Decisions are Future Focused?

  • Real estate
  • Retirement
  • Saving for large purchases (vacations, cars, a new pet)
  • CDs (not the discs), index funds, other types of investments

Evan’s daily trading is only “future focused” because he trades futures, not stocks. <- pun for those of you who are day traders or live with one. But, those trades are based on minute-by minute changes in order to earn money. All the types of investments listed above are not that quick. They require more thought ahead of time.

When I opened my retirement account, Evan calculated how different it would be in 20, 30, 50 years if I started investing then versus how much it would be worth if I waited till I was 25 or 30. I don’t remember the exact numbers, but it was quite dramatic. You have to start thinking ahead as early as possible for those long-term investments.

How can I Overcome Make Future-Focused Financial Decisions?

Now, if you’ve analyzed your impulsivity or recognized that you may be prone to having the instant gratification bias, do not be discouraged. Focusing on the future and long-term outcomes is something you can learn.

One well-known study on instant gratification involved asking preschoolers if they would like a marshmallow now or two marshmallows later. Essentially, kids who chose delayed gratification rather than instant gratification were more successful in their lives later. An interview with the researcher on his book touches on teaching children self-control. If kids can learn how to appreciate delayed gratification, you definitely can.

This article from Greater Good, a magazine out of UC Berkeley discusses a more recent study on the same premise, but adding in cooperation. I’m not sure if this is studied much, but for you couples out there, cooperation may be key to helping you choose smart long-term financial decisions over short-term spending gratification. I know for us, we usually push each other to make smart financial decisions, but also encourage some spending on more short-term stuff, just because otherwise we’d just save and invest till we die.

To conclude, here are some bullet points on tips to change your mindset and focus on the future more instead of instant gratification in personal finance.

  • Think on impulse buys. Instead of immediately buying something you don’t really need, stick it in your cart on the store’s website and just leave it there. You will probably forget about it. If you don’t, then you will have had more time to think about it and decide whether that is something you actually will use or if it just would’ve been an impulse purchase. This is what I do with clothes a lot. It’s basically online window shopping for me.
  • Write down your financial goals for your life – all the way to the end. If you have your plan laid out, it will force you to think about it and plan rather than just having an idea in your head of “oh I’d like to have a house by 30”. Wanting something doesn’t make it happen. If you’re blowing your paycheck now, you’re not going to magically have money when you’re 30 for a down payment.
  • Start taking action right now. I think retirement is something people our age don’t think about or don’t want to think about. Now is the time to start thinking about it though. Your $500 into a Roth IRA will make wayyyy more of a difference now than in 10 years.
  • Throw everything into savings and investments except the money you are fine with spending. Keep that in checking. Don’t keep everything in checking. Look at our post on smart spending for how to use that spending cash.
  • Talk about your future plans with your significant other, parents, or whoever is there for you the most. That way your long-term financial plans aren’t just in your head where you can change them whenever you want. Don’t depend on them for accountability unless you specifically ask for that, but sometimes they’ll provide an encouraging comment or question a not-so-smart financial decision.
  • Learn about long-term investments. If you couldn’t tell by my list of “CD’s, index funds, other types of investments”, I do not know about every investment type and what they do. Evan knows more but he’s busy with homework and I don’t want to bug him right now. Anyway, I’m sure you can find tons of information online. Your investment style and your financial situation are probably very different from ours, just because those are different for everyone. So, do your research.
  • Don’t get into a pyramid scheme, MLM, or Ponzi scheme. Be really cautious with forex, day trading, or anything that seems to be “get rich quick”. Retirement accounts and other long-term investments are long-term for a reason. If someone (especially on social media) comes to you with a business proposal, investment strategy, or a “unique opportunity” to make money immediately or money on the side, DO NOT DO IT. If you have to spend money to get into a pre-existing fitness supplement business, that’s not going to make you money.
  • Invest instead of just saving. Inflation is a thing and it’s going to cause your money to be worth less in the future if you keep it in an ordinary savings account. If you already are investing, make sure to diversify your portfolio. Just because your Zoom stock is doing well now, doesn’t mean it will be in 10 years. Add in real estate, or something else as well. Don’t put all your eggs in one basket.
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Maisy
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The author of Cute Canny Couple

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