Learning to Say No
The single largest contributor to savings in any change in spending is simply the addition of the word “no” onto certain regular practices. Bars, movies, restaurants, strip clubs, and let’s not forget drugs, are an expensive addition to any persons budget. Some people decide that one or several of those aforementioned things are all we need in life. We call those people crackheads, burnouts, etc. They have the self discipline of a gnat, and destroy themselves by sacrificing hard work and delayed gratification to what feels good now.
On the note of discipline and self gratification, I’d like to discuss the results of an experiment conducted by Walter Mischel and his team of researchers in the late 60's and early 70's. How it relates to saying "no" will become apparent. The experiment goes a little something like this:
A young child is placed alone in a room, and given a marshmallow (or similar treat) by a researcher. The researcher tells the child that if they are going to leave for 15 minutes, and that if they come back and the child still hasn’t eaten the marshmallow, that they are going to be given a second one. They also tell the child they are free to eat the first one whenever they want, but if they do, they will not receive the second marshmallow. They wanted to correlate age with the ability to delay/ defer gratification. There were three groups of results:
Kids that ate the marshmallow the second the researcher left the room
Kids that waited for a few minutes but finally caved and ate the marshmallow
Kids that waited the entire duration, and received a second marshmallow (approximately 1/3 of the kids that tried to wait were able to do so. The other 2/3 failed).
Now, what they found was a correlation that the child’s ability to delay gratification was improved with age (that is, younger kids succumb to eating the marshmallow more quickly and with higher frequency than did older children).
In that day and age, that was the end of the experiment. They concluded their results and published papers. But the story becomes interesting when the experiment was followed up on, 20-40 years later. They tracked down many of the kids in the experiment, to observe what their lives were like. They took SAT scores, BMI measurements, educational attainment levels, and other factors and compared them to the original delayed gratification results from when they were children. What they found was that the better the child’s ability to delay gratification when they were young was one of the greatest indicators of “success” as it is traditionally defined – happiness, financial abundance, healthy social life, and higher education.
The children that had very poor ability to delay gratification tended to be the ones that had social problems, poor education, low income, and tended to be less happy and overweight.
So how does this study relate to finance? You’ve probably guessed it. You need to develop the self discipline to delay gratification if you do not currently possess that ability.
There’s a cool phenomenon surrounding self discipline, and it’s that the more you use it, the stronger it gets, both on a microscopic and macroscopic scale. The first two weeks that you tell your friends you’re not going drinking with them because you decided to pay off your car early are going to be real rough. You feel guilty. You’re not spending time with them hardly as much as you used to. But the satisfaction of chiseling away double the principal on your car every month adds up to that glorious moment of freedom when the account hits zero and it starts being cash in your pocket instead. Maybe then you can reward yourself by getting blitzed with your buddies…
This can apply this anecdotally to eating at restaurants and fast food joints after you're out of work for the day. Picture this: you're hungry and there is nothing to cook at home in the fridge. This leads you to the logical conclusion that in order to gratify your hunger, you spend excess money on food for immediate satisfaction (food that probably isn't good for you either). If you practice delayed gratification, you fight through the hunger and go to the store, use mental energy to come up with a recipe for something to make, then you go home and cook. The reward in this case is less money out of your pocket spent on food, leftovers for the day (or two) afterward, and the probability that whatever you made is healthier than Taco Bell (hint: this is not difficult to achieve.)
If there is something in your life that you can practice delayed gratification on, or saying "no" to, give it a try. With few exceptions, the delayed result is better, often exponentially better, than what you can get now. This practice is seen throughout the globe and our daily lives, you are punished for acting impulsively - for example buying a new car when you can't pay for it with cash. You pay $5,000 in interest through the course of a loan. If you drive your POS Honda for another 3 years and save, you could pay cash and save all of that money. This is the way of the financial martial arts master. Ask a millionaire and they will tell you that living frugal is the key to living free and staying in the two comma club. People that drive the newest S-Class and have Prada diapers for their kids are either obscenely rich, or they are living above their means. Warren Buffet drove a Cadillac DTS - not a cheap car, but also not an expensive car either.
Living in this way will eventually free you from the confines of never having enough. It will give you the ability to not be ashamed when you decide to go on a weekend bender or buy a corvette on a whim.
When you say no, your pockets start saying yes.