How Instant Vs Delayed Gratification Affects Your Money

The other day my mate and I were singing along very loudly (and very badly) to Halsey as we drove back from picking up our favourite baked ricotta cheesecake from our favourite patisserie. We didn’t even have an excuse for picking up a cheesecake. We just wanted to celebrate the fact that we both had the day off work together but, honestly, I have never seen my mate so excited about a cheesecake in my life.

Whilst we were driving along, it randomly struck me to ask my very excited friend a question.

“If you were asked to give up this cheesecake right now, would you?”

“Absolutely not, mate.”

“But what if, in exchange for giving this cheesecake up right now, you were guaranteed a free cheesecake every month for the rest of your life”

Honestly, I didn’t actually think she would budge on her original answer. I mean, we were both already salivating from the smell of it wafting through the car.

After a lot of umming and ahing on her behalf, my mate finally answered:

“Yeh alright, I’ll give up the cheesecake right now if it means that I can have more free cheesecake in the future.”

But what the hell does cheesecake have to do with your money?

In this case, everything.

Instant gratification is when you want to experience pleasure right bloody now, even if it means forgoing even more pleasure in the future.

Delayed gratification, on the other hand, is when you put off that short-term pleasure to experience an even greater amount of pleasure in the future.

In the case of the aforementioned cheesecake, my mate chose delayed gratification because she would be giving up cheesecake now to get even more cheesecake later on.

And when it comes to your finances, you should be choosing delayed gratification too.

Let’s do a quiz. Take a moment to imagine you have an extra $1000 floating around. Would you…

a) Blow it on a raging party for you and your mates?
b) Splurge on a new phone?
c) Stash it away in a savings account?
d) Invest it in an ETF?

If you chose A or B, you are all about that instant gratification.

If you chose C or D, good bloody choice because you chose delayed gratification.

By stashing your money away in a high interest savings account or investing it in an ETF, you are missing out on receiving any instant pleasure from that $1000 BUT you are going to derive even more pleasure from that money in the future. Check it out.

If you stashed that money in a high interest savings account with a rate of 2%, in 10 years that money would be worth $1221.

If you stashed that money in that same high interest savings account with a rate of 2%, in 20 years that money would be worth $1491.

If you invested in an ETF with an average annual return rate of 10%, in 10 years your money would be worth $2707.

Now imagine you invested that $1000 in an ETF for 20 years. That original $1000 would be worth $7328.

AAANDD if you initially invested that $1000 in the ETF, and then decided to invest an additional $100 into that ETF every single month, your money would be worth a whopping $83,265 in 20 years.

Imagine just how many raging bloody parties you could throw with all of your mates in twenty years with all of that extra money you’ve made.

This is why that question I asked my mate about the cheesecake is so bloody important. Choosing delayed gratification is difficult in the moment, but if you can change your mindset to focus on that future pleasure, then you’re going to end up in a much more comfortable financial position later on. Spending $1000 now might make you happy for half a second, but investing that money and setting yourself up for a comfortable financial future is going to make you a lot happier in the long run.

I know what quiz answer I would choose, do you?

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The Stingy Bitch

Based in Sydney, Australia.
Created in 2020.

This site and all of it’s contents are provided for entertainment purposes only and do not constitute personal financial advice. All products that are mentioned are general product advice only, not personal product advice. Not all options are presented and my opinions are subject to change. All content and posts have been prepared as a general summary only and is not intended to be financial advice with respect to any particular matter. This post should not be relied on with respect to any particular matter. If you have questions about any aspect of the content or this site or otherwise require personal financial advice, you ought to seek financial advice. The author disclaims liability to any person who relies on this post.

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Published by thestingybitch

A Twenty-Somethings Guide to Saving Money Whilst Still Living Your Best Life

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