Decision Tips
Know your personality tendencies toward immediate gratification.
Patience doesn’t always help, but impatience never does.
—Anonymous
Sheri Weiner grew up in relative affluence. She got a car when she turned 16. Her dad gave her a credit card for her 17th birthday. Her folks paid her college tuition and sent her a check each month to cover her additional college expenses. Sheri never really grasped concepts such as budgets, saving money, or delaying immediate gratification. When she saw something she wanted, she bought it.
Sheri is now 25. She has a full-time job, a nicely furnished apartment, a well-stocked wardrobe closet, and a huge stack of bills. A week doesn’t go by that she doesn’t get a call from one of her creditors asking for money. When I asked Sheri how much she owed, she thought for a moment, then said: “I have to admit, I’m not really sure. If you count all my credit cards, I’d guess about $15,000.” Sheri guessed wrong! Finally fed up with the constant hassles from collection agencies, she went to a bill-consolidation service. They carefully tallied up her credit card debts—all $37,000 of them! Moreover, they showed Sheri that her $400 minimum monthly payment on those cards wasn’t even covering the $550 a month she was accumulating in interest. Sheri was dumbfounded. How did she get herself into this mess?
Sheri is not unique. More than 39 percent of U.S. households pay interest on credit card balances.1 And in 2014 that average balance was $8,220.2 “Buy now, pay later!” has become the mantra of consumers in much of the industrialized world. For many people, it’s hard to delay immediate gratification. Interestingly, this behavior is essentially the opposite of procrastination. Both are self-control problems. But one relates to the preference for inertia while the other reflects a present-biased preference. In addition, both behaviors are one part personality and one part situational. Look back at your results for impulsiveness in Chapter 9, “Are You Impulsive?” If you scored over 70 on that test, you are likely to have difficulty in postponing immediate gratification. As you’ll see, there are rewards and costs that lead all of us toward preferring the immediate over the long-term. Yet some people have become proficient at learning how to control the immediate gratification bias.
As human beings, we suffer from the tendency to want to grab for immediate rewards and avoid immediate costs.3 If it feels good, we want to do it now. If it implies pain, we want to postpone it. Why is it hard to diet, quit smoking, or avoid credit card debt? Each comes with an immediate reward—tasty food, an enjoyable cigarette, an immediate purchase. And each delays its costs to some nebulous future.
Why is it so hard to diet, quit smoking, or avoid credit card debt? Each comes with an immediate reward, and each delays its cost to some nebulous future.
In recent years, the concept of emotional intelligence (EI) has gotten a great deal of attention.4 The evidence indicates that people with strong EI have superior coping skills and are better able to deal with life’s pressures and stress. One element of this concept that interests us is that studies show people with EI have the ability to delay gratification. For instance, in one study, four-year-olds were given two choices: They could receive one marshmallow immediately or wait a few minutes and receive two.5 In a follow-up ten years later, it was found that the kids who could delay gratification were less easily frustrated, less stubborn, more popular, more self-assured, better able to handle stress, more likely to plan ahead, and generally had less trouble dealing with life than those who sought instant gratification. This makes a pretty strong case for the value of EI and the ability to delay immediate gratification.
Let’s spend a moment returning to the situational aspects of delayed gratification. Regardless of our personality disposition, activities that provide immediate rewards with delayed costs inherently encourage us to “live for the moment.” Unfortunately, our lives are filled with decisions that require a longer-term perspective, and many of these decisions are important. For instance, the decision to drop out of college and go to work provides immediate rewards—a regular paycheck and the cessation of unpleasant tasks like attending classes, studying, and taking exams. Meanwhile, the payoff from getting that college degree remains uncertain. It’s often difficult for an 18-year-old to see four years or more into the future. Similarly, putting money away each month for retirement requires us to forego spending today in hope that our money will grow and that we’ll be alive to enjoy it. Notice that both of these situations not only have delayed payoffs from postponing immediate gratification but also the payoffs are uncertain.
One of the reasons many of us lack patience and a long-term perspective is that the further a payoff lies into the future, the less we tend to value it. To many an 18-year-old, a great job in 20 years (which requires a college degree) or a comfortable retirement in 40 years (because we began saving early) seems a long way away and hence will be heavily discounted. We know what a dollar will buy today, but we don’t know its value in 10 or 20 years. This was driven home to me by a professor/friend of mine, who explained why he stopped writing books and focused his time on consulting. “I do a consulting job, and I’m paid a fixed and predictable sum within a few weeks of completing the assignment. I write a book, and I have to wait a year or two for it to be published and to get a royalty check. And then the check could be for $20,000 or $100. I love writing, but consulting provides me with an immediate and known reward.”
If you want to overcome the temptations of immediate gratification, you can do a couple of things. First, set long-term goals and review them regularly. This can help you focus on the longer term and help you to justify making decisions whose payoffs may be far into the future. If you don’t know where you want to be in 10 or 20 years, it’s easier to discount your future and live for the moment. Second, pay attention to both rewards and costs. Our natural tendency is to inflate immediate rewards and underplay future costs. For important decisions, carefully consider future costs. For instance, think about what it would be like to be broke in your old age. Also, look around for examples of people who didn’t plan for their future and now are suffering the consequences. If you’re having trouble keeping your credit card spending in control, talk with a few people whose credit card debts led them to bankruptcy. Listen as they describe the anguish and embarrassment they’ve had to suffer.
Know your personality tendencies toward immediate gratification.
Set long-term goals and review them regularly.
Fully consider future costs.