There was just a room, with one child in it, one of his favourite treats on the table, and a promise: “Wait until I return, and you will get another one of those sweets – or eat it whenever you want, and you don’t get another one.”
From an adjacent room, the Walter Mischel, professor from Stanford University observed his subjects one after the other.
Some kids simply ate the sweet as soon as the researcher left the room.
Others did everything they could to ignore the sweets. They would look in other directions, try to hide the sweets under the desk and so on. In short, they tried to wait, in order to get the second sweets.
In follow up studies it was found that the kids who were able to wait for the second sweet, were significantly more successful in life across a variety of measures, including academic scores, body weight, average income, career achievements and so forth, than the ones who tried to get one sweet as quickly as possible.
We live in a world that tries to sell instant gratification to us. The result is that we begin to expect instant gratification. But instant gratification is almost always expensive. And in adult life, it is much more expensive than just a sweet.
Every skill that you want to master regarding the development of financial, spiritual, and emotional wealth, is going to take deferred gratification. Your ability to put aside some instant gratification for the sake of developing these skills, is going to be one of the most important elements in determining whether you will master these skills.
So although I am linking this article specifically to the two blocks that contain the words “discipline” today, remember that this principle of learning to be comfortable with deferred gratification applies to pretty much every block on your own Personal Balanced Wealth Balance Sheet.
So today I specifically would like to look at the blocks that relate to Personal Financial Management Skill and Discipline. And more specifically, today we will look at: Discipline.
One of the most important reasons you work, is to earn money. But we don’t always realize the impact that the way we manage that money can have on our long term wealth, and even on our medium term well-being.
Financial discipline consists of two portions:
- The discipline to regularly budget, record, and thus make deliberate and wise decisions about how you will spend your money
- The discipline to say “no” now, and build up the resources to be able to say “yes” to something better, later
The second point is what we are talking about today.
As usual with most things this is not an “on/off” situation. It’s not that you have this discipline or you don’t. On the one extreme is succumbing to the instant gratification offered by the commercial world in the form of “buy now, pay later.” We will look at this one today.
Somewhere in the middle, is succumbing to the temptation of spending money you actually have, on something you don’t desperately need, instead of investing that money.
And on the better side of the scale, is making wise investment decisions, and thinking like Warren Buffet does – that everything you buy now actually costs ten times the price tag, in the lost potential earnings you could have gained if you invested that money wisely.
Living Off Debt
Let us start with this one: Allowing yourself to make debt in order to get something now, that you should rather have saved for, or shouldn’t have purchased at all.
Note that I am not propagating that debt is a bad thing in principle. Debt can be a useful financial instrument. But I am specifically talking about using debt as a way of instant gratification– to simply make debt in order to get something right now, which you should have waited for, or maybe should not have purchased at all.
I am going to use a simple example of a nice new shirt.
But before we get to the example, let’s just look quickly at the basic theory of motivation, because one of the greatest impacts of instant gratification through debt is that it destroys the natural process of motivation in your life:
The basic theory of motivation looks like this:
If I want a certain result, and I know what action to take to get that result, I will be motivated to take that action if two conditions are met:
- I must have enough faith that the action will indeed produce the result
- I must believe that I am able to successfully take the action
When the understanding of what action to take, the belief that the action will produce the result, and the belief that you can indeed successfully take that action, all combine, and there is a strong desire in your heart and mind, you will be naturally motivated to take that action. And whilst performing that action, you will experience a high sense of motivation and enjoyment. When you get the result, you will experience a sense of satisfaction and accomplishment, which becomes the foundation on which further motivation to take action, and belief in your ability to take action and produce results, are built.
Now let’s see what debt does to this process:
I will use an example of a really nice shirt. First, we will see the process working well, without debt:
One day on the way to work, you see a nice shirt. It costs more than you typically have spare in a month, but you really like it, so you go to the shop owner, and ask them if there is any risk that this shirt would run out of stock soon, because you want one, but you don’t have the money right now. He smiles, and says that he will put one aside for you, if you gave him a small deposit – and you could come and pay him every month until you’ve paid for the shirt – then he will give it to you.
So you go to work, feeling all motivated, and every day you work with a smile, dreaming of your new shirt.
The end of each month you pay off a bit, and four months later, you walk out of there with a big smile, and a brand new shirt on your back. You will feel a healthy sense of accomplishment, you will enjoy the shirt, and you will have built a belief in your ability to work towards goals that are important to you.
Or you take another approach:
But before we talk about the other approach, you need to understand that we are also motivated by fear of undesired results.
If there is some potential pain on the horizon, I believe that a certain action can prevent that pain, and I believe that I can successfully take that action, then I will take the action to avoid the pain. The problem here is that this is a stressful situation. Every item in your life that is driven by this pattern of motivation increases your stress, and decreases your ability to enjoy life.
So let’s get back to the shirt:
Same scenario: You are walking down the street, and you see this really nice shirt in the window. It is ten days before pay day. You know that you don’t have money left in your bank account (and you normally don’t, by this time of the month), but you have this little thing called a credit card. So you walk into the store, fit the shirt, you like it, and you buy it. (Or rather, the bank buys it for you, and you agree to pay the bank back – with interest. Of course this whole process of the bank buying it, and you agreeing to pay back, happens in an instant as you swipe the card, sign that little slip and/or punch in you PIN.)
This might seem like a small little act, but you’ve just undermined one of the most important elements of building a fulfilling and satisfying life – a life of wellness – and that is that you have put yourself on the wrong side of the the basic law of motivation. You have traded desire for fear. You have replaced the desire for that shirt, with fear of the bank.
You now know that the end of this month, you have to pay a little bit extra – and you already have been struggling at the end of every month. So you go to work with a frown on your brow. Furthermore, your work has no reward left. You have already obtained the reward – you are already wearing the shirt. So the only motivation that remains for your work is the motivation of fear of not being able to pay debts at the end of the month.
If you do this with one item, it may make little difference. But when you start piling them on, it becomes a lifestyle. You end up working every day with no other motivation than the fear of not being able to meet your obligations at the end of the month.
By the time you get your money, you’ve already spent, and enjoyed all possible pleasure you can get from it, so all you do is hand it over to the bank, and start again.
You’ve enslaved yourself – sold yourself to a system.
Furthermore, you are now paying interest. That shirt paid over six months, depending on the interest, could easily end up costing 50% more than if you had saved up for it and bought it. Furthermore, if you waited until the end of the season, you could probably have picked it up for half price.
So how does this fit into a blog on a web site that’s about careers?
It’s like this:
Feeling highly motivated is one of the most fundamental aspects of success. Our performance when highly motivated is much, much higher than our performance when lowly motivated. Over a period of a few months and years, your levels of motivation will significantly impact your ability to build a strong career.
And motivation is an emotion. One of the interesting characteristics of emotions is that they are not easily compartmentalised. You can choose to think about work things at work, and think about personal things at home, but you cannot switch emotions on and off like that. If you are struggling with your personal relationships, you will carry those emotions into the work place with you. If you are struggling financially, it will create stress at home and at work. If the way you manage your finances causes you to get on the wrong side of the motivational principles, your motivation at work will suffer, and your career will suffer. You may be able to motivate yourself for a time with fear, but sooner or later that stress can contribute to burn-out.
Learning to manage the process of identifying your desires, and then using them to motivate you, instead of allowing them to enslave you, is an important discipline that will help you to maintain high positive levels of motivation. And you need those to drive a strong career.
To Your Balanced Wealth
About The Author
Ashton Fourie is a Management and Organisation Development consultant with a passion for life-long learning and growth as foundations for meaningful success. He started out working as an office cleaner for a small cardboard factory, worked himself up, and has since built up 15 years of management experience, obtained a degree in Business Management and is completing a Master’s Degree in Managing and Leading Innovation and Change. He is married to a beautiful Chinese lady and has a 7 year old daughter and 5 year old son, who are both fluent in English and Mandarin Chinese.