A decades-long study has been conducted with children using marshmallows to determine their ability to make long-term decisions. The experiment is simple. Children are presented with a marshmallow; the person conducting the experiment tells the children they can eat the marshmallow now, or if the child waits 15 minutes before eating the marshmallow, the child will be presented with a second marshmallow. The child has to decide if it is worth waiting the grueling 15 minutes before eating the marshmallow in order to have two marshmallows. The study tracks the percentage of children who have self-control and long-term thinking capabilities to forgo immediate gratification for a larger reward in the future.
What if you were offered $10,000 today that you could spend as soon as you want, but if you waited 30 years to spend the money, you would be given $1,000,000? This is a choice you make when you save for your retirement. Thirty years is a lot longer to wait than the 15 minutes for the marshmallow, but the requirement for long-term thinking is still needed to end up with the better outcome.
As a financial planner, one of the best parts of my job is watching the families I take care of enjoying their life after work. The stories about the trips they take, or seeing them spend their winters in Florida, or the joy they have when they talk about not having to wake up early on Monday mornings to drive to work – this drives me to help more families reach this mountain top. But the reality is, this dream was not accomplished overnight. It took years of sacrifice, discipline, and patience to get to the point where they could officially leave the workforce.
Saving for retirement is not rocket science. What I mean to say is that you do not need a degree in finance or a deep understanding of the stock market to have success in the stock market. So why don’t more people retire with more money in their investments?
Because saving for retirement requires the discipline to live on less than you make. It requires saying no to newer vehicles or saying no to expensive vacations. It requires paying attention to the dollars that come in and the dollars that go out. This is not difficult in an academic sense, but it is very difficult in a behavioral sense.
Popular culture pushes all of us towards instant gratification. We live in a consumer-driven economy. Keeping up with the Jones’s is not a new phenomenon, but it is nevertheless more prevalent with the addition of social media that floods our feeds with images of families taking big trips or buying new homes. We are constantly being told to eat the marshmallow.
Your life after work starts with a vision. This vision provides a focus point, and it reminds you when you add money to your investments, rather than adding money to your standard of living, that waiting for two marshmallows will be worth it.
Financial Enhancement Group is an SEC Registered Investment Advisor. Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.