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25/8/2016

1 Comment

Financial Planning Is Really About.....Delayed Gratification

 
Moving from failure to success in anything will often mean exchanging a bad habit for a good one. Habits around decent wealth management are a great example of this. You probably know what I mean. We focus on the present – we want it and we want it now. The outperformers though resist some of this short-term temptation for an immediate reward and wait to receive a larger or more enduring reward later on.
That’s at the core of financial planning!!
 
American psychologist Walter Mischel has run a series of experiments studying how kids, and others, delay gratification.
 
One famous experiment gave a marshmallow to a four-year-old. The child was left alone with the marshmallow for twenty minutes. The child could eat the marshmallow at any time. But if they didn’t they were rewarded with another marshmallow after twenty minutes.
 
It was a simple proposition: one now, or two later.
 
The results are really interesting. And funny to watch as these kids wrestle with the agony of waiting in the hope of a bigger prize!! The tests have been repeated many times, you can watch one here: The Marshmallow Test (This is really funny. Watch it to the end!).
 
Over 90% of the kids eat the marshmallow. Perhaps not straight away: many a marshmallow is slowly touched, pinched, nibbled and licked in to a sugary mess, before it all gets too much for the tortured toddler who in the end just gobbles it down.
 
The original experiments were done in the 1960’s, so the original subjects would be well and truly nearing retirement. So far the results have been near perfect predictors of future financial fortunes. The kids who deferred gratification matured into above average achievers in later life. This is not just financially, but right across the performance spectrum, including, (no surprises here), lower body fat levels!
 
Maybe, 90% of people under age five failing the marshmallow test explains why 80% of people over 65 live on the age pension.
 
If you would like to try the digital equivalent, take this Guardian quiz.
 
The good news is Mischel’s subsequent experiments suggest deferred gratification is a learned response.
 
You can change.
 
Properly informed and motivated, if you can't resist the marsh mellow, it is possible to change your financially self-sabotaging habits, and join the 10% of financial outperformers.

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1 Comment
Tracie
6/9/2016 07:40:36 am

Enjoyed the video, makes a good point

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