Delayed gratification

Delayed gratification or instant gratification?  This is the choice we have to face every day.

Nowadays, the vacation has not started yet, the message is already out:  Jane Doe is going to see Asia.  Once she is there, the pictures are like a waterfall: it never stops on the Facebook, Twitter, Instagram, etc.

What are you thinking after seeing your friends’ beautiful pictures?  “I wish I were there”, or “I’m going there next year, no matter what.”  Oh my, it’s tempting, isn’t it?

Are we supposed to be humble, not to brag about our travels, material stuff, wealth, and try not to influence others?  Living in this digital world, we got acclimated to the so-called “sharing”. Even a homebody like me bragged my travel experience in Taipei.

Instant gratification is the trend.  Many people want to get rewarded, right now.  Waiting?  No, they don’t want to miss the fun.

As a result, many ended up in big debt, and lost the focus on big things: build up emergency fund, save and invest for retirement, and for kids’ college, etc.

Delayed gratification is a dinosaur.  Old concept doesn’t necessarily mean it’s bad.

Delayed gratification is a good, slow and boring tool to accumulate wealth:

Delayed gratification is really not that exciting.

Let’s say, you just got a birthday gift (at the age of 25) from your grandparents, a check of $5K.  You plan to save and invest it.  To be conservative, let’s assume: the money doubles every 10 years.  This is what you’ll have:

Your age                              Amount

25                                           $5K

35                                           $10K

45                                           $20K

55                                           $40K

65                                           $80K

If you spend it now, the money is gone.  And you don’t have to worry about the math.

If you choose to invest it, it will grow to $20K after 20 years, and to $80K after 40 years.

When I was a kid, many families in that village raised chickens as one income.  People always said:  “Don’t kill the young hens.”  Why?  That’s delayed gratification: each hen had the potential to produce more eggs, and could hatch out more baby chicks.

Year after year, the hens did lots of hard work.  It’s snowballing.  At the end, the hen became too old, and ended up on the family’s dinner table.

Saving and investing is a long and slow process.  As long as you keep investing consistently, time is your friend.  The longer your money sits in the pot, the bigger the pot will grow.

Delayed gratification is boring.  But it’s rewarding at the end.  You got enough money set aside to retire, so the 8-5 regular job becomes optional.  Your life is not controlled by the employer anymore.  How sweet is that?

Delayed gratification requires discipline: 

Here comes the hard part: we have to resist the bombarding temptations.  It requires discipline.  This is where many people fumbled.

Everyone knows what delayed gratification is.  The compounding makes perfect sense.  But, taking the actions is not easy.  I failed not just once, but twice.

Delayed gratification is not a one-time thing.  It’s an ongoing effort, and has to become a newly adopted habit.  It’s the right thing to do, and is good for us and our families in the long run.

As a parent, if we could delay the gratifications, that sets a good example for our kids.  They are observing and following everything we do, though they may ignore the words we say.

Delayed gratification does not deny occasional splurges:

I’m sure you like to hear this: it’s okay to splurge once a while.  But, don’t let splurge become a habit, and make sure you can really afford it.

Check the post “What a #YOLO Trip Looks Like for Inherently Frugal People: Stanley Cup Finals in Vegas” on Gen Y Money.  The millennial couple lives frugally, and the young husband fell in love with his worn-out shorts.  But they do spend money on what matters the most.

Talking about affordability, the Suze Orman show on CNBC (the show was closed) used to have one section called “Can I afford it?”  That’s my favorite section.

Audience called in.  Suze’s signature question was: “What do you want to buy, my friend?”  The audience presented the case: the financial numbers, what and why he/she wanted to buy.  Suze made the final verdict:  Approved or Denied.  It was fun and educational.

Delayed gratification: how delayed should it be?

Delayed gratification still means gratification.  It is just planned for a later time.  If you totally forget about gratification, that’s probably too harsh to yourself.

But, the question is: how late should it be?  When should we start enjoying our savings?  Back to the original story, you got the $5K at 25 from your grandparents.  Should you spend it at the age of 45, 55, 65, or even later?

This question has been lingering in my mind for a long time.  I’m an early retiree.  Should I wait till 65 when Medicare kicks in, before really enjoying the money?  I don’t know.

I like to travel a little bit more.  Yeah, a brand-new car is still looking gorgeous to me.

This is how I do my retirement planning:

Y / X = Z

“Y”, the numerator, is my total wealth, excluding the house and car.

“X”, the denominator, is the number of years left.  85 is used as the check-out age.  I’m 52 now.  So X = 85 – 52 = 33 years.

And the division result “Z” is the amount of money I could use every year.  In my case right now, it’s like the 3% rule.  Just a ballpark estimate.

As the time goes on, definitely “Y” (the wealth) keeps growing, as the market is going up overall.  At the same time, “X” (the years left) becomes smaller, as I’m getting closer to the ground.  So, “Z” is getting bigger.  It means, after 10 or 20 years, I’ll have much more money to use annually.

The question is: will I be healthy enough to enjoy the growing money at that time?  Nobody knows.  It’s a gamble.

I wish I knew how long I’m going to live. As sort of a control freak, I like to plan things ahead. But, mortality is not something I can control and plan for.

It’s not pretty to let the money run out.  On the other hand, it’s not fun to let the time run out either, before spending the money.  What a conflict!

If I’m too old and fragile to walk someday, what’s the point of having that money?  So I could use it for the nursing home?  No, I don’t want to go to the nursing home.

Let me stop painting this depressing picture.

Summary:

Delayed gratification is still the right way to go.  But, don’t forget to enjoy the money down the road, while you still can.  That’s the point.

Questions to you: what’s the perfect age to start enjoying the retirement savings?  Are you worried about leaving too much money behind, and not having enough time to spend?

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8 Responses

  1. Hi Helen, I think the perfect age is when one feels they have enough money and when the time feels right. This is very subjective, but that was my formula. I worry a little about both spending to much or to little. Not having children to leave money for, I’d love for my wife and I to die broke.
    Tom

    • Retire Early Helen says:

      Tom, that’s really a great thought: “the perfect age is when one feels they have enough money and when the time feels right”. As long as I could figure out the two variables: enough money, and right time, the rest should be an easy cruise. I’ll definitely spend some time to think about it seriously. Thank you.

      Letting the money and time run out hand by hand, i.e. dying broke, would be a perfect planning. That could really win the Nobel prize on economics.

  2. GYM says:

    Thank you for the mention Helen! Another beautiful post from you. In Canada, you have the option of getting less money starting at age 60 (I believe) or more money at age 65. I think research says that it is better to wait until 65, but personally I will probably start collecting earlier, because who knows how long I have to live AND have good quality of life (e.g. be able to walk without pain or get around and travel). I know too many people who just retired and got diagnosed with cancer or had a heart attack and didn’t get to enjoy their pension! I know it’s hard to predict your mortality but I guess it is dependent on the person.

    I would feel uncomfortable dying broke (that’s why the 4% SWR does not appeal to me).

    • Retire Early Helen says:

      Hi GYM, thank you. The rule in US is similar for Social Security (SS). At age 67, we’ll get 100% of the benefit. The earliest age to claim SS is 62, but with only 70%. I think the same way health-wise, and plan to start at 62. The break-even point is around age 77.

      If I live beyond 77, my investment will have grown decently. At that point, the monthly difference (collected less from SS) will not be a big deal anymore, I guess.

  3. Caroline says:

    I agree with Tom “when one feels they have enough money and when the time feels right”. I also think all of us are fortunate and some people may not have that kind of choice.
    As far as leaving money behind? I love my kids more than anything in the world and have done everything for them over the last 22 years…but I am totally ok if I spent all my money (or close to) by the time I die!

    • Retire Early Helen says:

      Yeah, Tom made a very good point. You are right, Caroline. Not everyone has that choice. The average retirement savings in US is really not that much. For some retirees, after several years, the savings are run out quickly. And they have to solely depend on the Social Security. Not a pretty picture.

  4. Steve says:

    Hi Helen,
    Financial planning would be so much easier if we new how our health and when our last day would be. I agree with the other comments “when one feels they have enough money and when the time feels right”. Its all about balance, I am still working part time because I enjoy it and it keeps me engaged and productive but if that changes so will I.

    • Retire Early Helen says:

      Hi Steve, right, health and time are two unknowns that make the planning so hard. I’m probably too cautious. Just like to think about different scenarios, and make sure I’m okay financially. That’s great you enjoy the current part-time work.

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