Delayed Gratification for Success

When I was a student, one of my coworkers and friends had a serious credit card problem.  It was very frustrating for me because I felt like I couldn’t convince him that he was headed for disaster.  He fully believed in his fiscal policy with such ferocity, it was like I was trying to argue that the sky is green instead of blue.  On top of that, he was acquiring all sorts of fun toys (like samauri swords, top of the line of computer peripherals, and an expansive collection of iPods).  How could my sound (yet ultimately lame) logic compete with the emotional high one gets when purchasing stuff?  I don’t typically like to tell people they are wrong, but if you use your credit cards like this guy…you’re doing it all WRONG!  Now on to what he did…

His costs to get the basic needs were all 0.  Scholarships and grants covered his tuition, books, and rent in the residence halls; Mom and dad had insurance for emergencies.  His job paid $121 every 2 weeks…so we’ll say $242 per month to keep it simple.  It certainly wasn’t a massive wage, but the entire sum was essentially “fun money”.  He could spend it all and not really have to worry about eating the next day.  Unfortunately his eyes were much bigger than his wallet so he used his credit cards.  He charged all sorts of electronics and sundries.  He judged his ability to purchase toys by his minimum payments.  After spending a few thousand and finding his minimum monthly payments to be around $150, he proudly exclaimed to me, “sweet, this means I have about $2,000 more to go spend.  Gotta go, I want to pick out a few DVDs on eBay.”

I don’t think I need to argue all of the reasons why that is a bad idea.  If you honestly don’t see any problems with it, then please seek advice from those close to you.

Having the means, doesn’t mean you should

In 2006 I saw a little blurb in Motor Trend about a car I had my eye on.  It was about two sentences long and basically just said, “the 2008 version will be a little bit wider”.  I had no idea what the car would look like but my sole complaint about the current model was that it looked too skinny!  I was in hog heaven and couldn’t wait to get a job and buy the 2008 model.  Once the pictures were released, I thought it was the best looking car to hit the streets.

Fortunately between having this thought and landing that job, I read “Rich Dad, Poor Dad”.  I knew that I was supposed to buy some assets before some doodads.  Trying to avoid being a total square, I told myself I’d still buy the 2008 model…just 2 years down the road.  That way it would be less expensive and it would give me an opportunity to invest.  My job paid well enough that I could afford the payments without any problems so it was really more of an exercise in good financial decisions.  I took the amount of money I’d spend each month and put it in a savings account.  As it started to accumulate, I began investing in other things.  Even if I lost all of my investment money, well I could still just pick up the car and make payments.  All I’d potentially lose is 2 years with the car of my dreams.

Half way there

Well here it is, 2009.  One year down and one more to go.  If you read my last article, you know that I’ve made some other poor financial decisions that have put a hurting on my current cash flow.  Fortunately as soon as I sell my other house I’ll get all of my money back, get a bunch more, and severely decrease my expenses.  Once the house sells, I should have enough to purchase the car in cash!  That is quite an upgrade, no?  If I bought last year, I’d still have 4 years more of payments and not a lot of expendable income.  If I buy the day my house sells, I’ll have the same car but no payments…so I’d have the car and expendable income.  Big win!  All I had to do was work a little harder and wait a year.

It’s still not enough

Again, I could buy the car but I still won’t.  I have a year to go on my promise and I don’t care for the current numbers.  If I bought the car it would almost be like starting at zero.  I’d have a nicer car but my bank account would look just like I graduated.

In the next year I want to continue saving heavily and invest the money I already have.  My hope is that in a year I’ll buy the car and still have plenty of money left over to keep investing.

Final thought

It definitely takes a certain amount of control to say, “I’m not going to get it even though I could”.  I’ve found that I keep so much money in my wallet because when I walk through the store I’m always thinking, “I’d really like to get that” followed by, “but do I really really need it?  Or is it just going to sit in one of my closets?”  I definitely screw up (just ask the cans of unopened tennis balls on my floor).  Denying yourself all the goodies that you crave can really take away the fun in life.  What’s the point of living unless you can’t let loose every now and again.  But if you can find a way to crave the doodads, delay your gratification, then use your cravings to fuel your enterprises that will provide some security and the doodad, then you will have made one more step towards infinite happiness.