We all know about instant gratification. It’s that feeling that when we find something we like, we must have it, here and now. It started when we were children. We would go to the store and find something we liked, and when we asked for it our parents said no. But then we cried and kicked and screamed until (for some of us) they gave in and bought it for us.
Little did our parents know that they had just injected us with the poison that would ultimately cost us financial freedom and millions of dollars. Sound crazy? Allow me to explain.
Instant Gratification will cost you millions
It sounds crazy, right? How can wanting something now cost me millions of dollars? I don’t even make, nor may I ever make millions of dollars. Well it’s quite simple when you factor in debt/interest/and the time value of money. You probably know about the first two, so let me dive right into the third: The time value of money.
The time value of money basically states that investing small amounts today is more valuable than investing larger amounts tomorrow (or in the years to come). To illustrate, see image below:
So Saver B put in a total of $14,400 and by retirement had $2.2 million dollars, whereas Saver A invested $72,000 (starting 8 years later) and by retirement had $1.7 million. Both have enough to retire on, sure, but imagine the amount of work Saver A had to put in to get there, vs. Saver B.
Then look at the amount of savings you are accumulating annually. I don’t know about you, but I haven’t started saving even $1800 per year, like the savers above have. The biggest reason? I don’t have any money… Why don’t I have any money? Because I love buying things, and haven’t developed the discipline it takes to say no to instant gratification.
Why Instant Gratification Will Cost You Millions
In case you haven’t figured it out yet, our desire for instant gratification leads us to buy things right when we want them. This leads to costing us millions in two ways: first, buying things immediately when we want them often leads to impulsive shopping, and takes away from our ability to save money. Second, as we feed our urge for instant gratification we often over extend ourselves, meaning we take on debt to purchase the things we want. This leads to interest, which is using the time value of money in the exact opposite way that we want (someone else is making the big bucks off of us).
Think about this: the small amount of discipline that we would require to skip those impulsive purchases could lend to our saving that money, and when put into an investment or retirement fund, could really capitalize on some riches.
The Latte Factor
I’m sure many of you have heard of this, but I’m going to explain it quickly to help you understand. $1800 annually amounts to a little less than $5 daily, or about the cost of a latte. Without making any significant changes to our spending, but simply cutting the latte (or your daily indulgence) spending, we could be investing 5 dollars a day in a way that will add up to MILLIONS!
I don’t know about you, but after realizing what our latte really costs us, I don’t want to drink a million dollar latte ever again.
To learn more about making millions from pennies and dollars, check out The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich
