“Good things come to those who wait”
Many of us have probably heard this quote before, and it is basically just describing delayed gratification. We will explore more below.
As humans, we are designed to always choose instant gratification. We very much live in the present and will almost always want to do something to get the instant reward. Many of us would have seen the experiment with kids and gratification. They have one marshmallow placed in front of them, and if they wait long enough they will be given an extra. Many of the kids eat it straight away, even if they know another one will eventually be given to them.
Although it seems like common sense to wait if we are getting a better deal, unfortunately our brains just aren’t wired that way. We want things now, and social media and advertising is only making this worse. The thing is though, if we can delay just some of this gratification, it will benefit in the long run. This applies to most aspects of our lives, but especially applies to our finances.
Delayed gratification is very relevant when it comes to our money management and is super important. Putting money away for ourselves early really helps set ourselves up in the future. It is easy to put it off and leave it for your future self, but the longer you leave it the harder it is to build your wealth. Making short term sacrifices early gives you a chance at a much better life in the future.
The more you sacrifice and put away now, the better off you will be thanks to compounding. The biggest component of compounding is TIME. The sooner you start investing for future you, the longer your money has to work and grow! $100 invested today is worth $222 in ten years time. $100 invested today is worth $2427 in forty years time!!! Both of these calculations are assuming growth of 8% per year, which is what the Australian share market returns on average. If you put in the hard work early, make sacrifices and delay some of that gratification, future you would be much better off because of it. If you leave it twenty years and blow all of your money now, future you will be $2k worse off per $100 you eventually invest.
Despite everything I just said, it can’t be all about future you. You still need to enjoy the present and live life. In my opinion, you can have both! Decide what is worth sacrificing and what isn’t, and save accordingly. You will need to make some sacrifices to look after future you, but you also don’t have to cut everything you love out! Good luck and if you want to get started investing but don’t know how- send me a message 🙂