Financial Wisdom in Delayed Gratification – Part 2

Delay, Gratification, Investment, Investing, Privetech

Does choosing between instant or delayed gratification have an impact on our finances? In our previous article, we introduced the definitions and what factors may cause us to lean towards one or the other (click here to read).

Today, we will be diving deeper into the financial implications of instant versus delayed gratification, and learn more if it directly affects our decisions in the areas of loans and investments. But just before we do that, let’s take a look at the results of the quiz in Part 1. Which category did you fall under?

Delay, Gratification, Investing, Investment, Privetech

It seems that a good number of us came under the balanced category, and more of us lean towards delayed gratification over instant gratification. The question now would be, would our decisions be similar when applied to finances? Let’s find out later.

Loans & Debt

Instant gratification can make us want things immediately, even when we can’t afford it. When we decide we cannot wait for the day we can finally afford it, we choose to take on loans and by doing so, enter the world of consumer debt.

The Federal Reserve Bank of New York reported a total household debt of $13.29 trillion in the second quarter of 2018. That is a lot of debt. Granted, there are some loans that are legitimate and can be useful and timely when used wisely. A study loan might enable one to get the correct qualifications and skills to kickstart a career with a higher starting income.

But loans also can be a double-edged sword if we are careless with them. We need to understand the effect of interest rates, and should strive to benefit from it with savings plans and investments, rather than struggling to pay back the loans we take (and the interest with it!)

When we get into debt, we are taking our money that we earn in the future, to pay for our expenses today. Is that wise in a financial sense? Can we justify with good reason, the purchases we make and the difference it makes to our credit scores?

We should take a step back, and reflect on the loans we currently have or are considering to take on. Are they truly necessary? Most loan providers spend good money on clever marketing, because they know humans are emotional and impulsive, so hence may give in to instant gratification. In order to overcome that, here are 3 areas we need to reflect on when considering loans

1. Wants vs Needs:

Do we really need to make this buying decision? Is it always about getting the bigger house, a nicer car, and more luxurious vacations to top our experiences? Extrapolate, and visualise ourselves having all these things and ask, when is enough, truly enough? How long would these things make us really happy for? A year? Maybe 5? Maybe 20? How certain are we?

2. The Time Factor:

Cognitive psychology tells us that when most people take a narrow view in making decisions, it might be because we tend to give more weight to the situation or problem, when it presents itself as the only problem at that point in time. But if we were to step back a little, and look at the problem in its recurrence and effect over the course of time, our attitude and the way we think about the problem could be fairly different.

Ask ourselves, do we really need this now? Could we wait for a better deal and allow our money to continue accruing interest while we wait? Is this the correct time to buy or are we being peer-pressured to follow a hype?

3. Alternatives and True motives:

What alternatives can we have that are less costly? Are there emotional or cognitive alternatives to replace our wants? Learning a new language or picking up a musical instrument might be much more prudent than the lifestyles or hobbies that we want to associate with being wealthy and famous. What are our true motives? Do we really love that $50,000 watch or do we just want others to perceive we are successful? Can we honestly admit to ourselves we are in no way affected by consumerism?


A key factor in mastering delayed gratification is the ability to be patient. Charlie Munger, a key business partner of Warren Buffett, once remarked “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”

This is indeed true in the world of investing. Most seasoned veterans would advise that the lack of patience causes many an investor to make mistakes. It is needed especially in sticking to the wisely calculated and planned strategy, instead of being over-reactive to market movements and news chatter.

The lure of instant profit is something not easy to deal with. We live in a world where we are conditioned to get things at the snap of our fingers. This is especially so when our society today is one with conveniences never possible a mere decade or two ago. From the food we eat, the services we use, and the multimedia we can command at demand, the norm of getting what we want, when we want it, has changed drastically by the power available at our fingertips today.

Every product shouts “Better! Faster! Now!” We are bombarded with the lure of rare and time-limited discounts, and investment opportunities that try to make you feel privileged and lucky. There are even some robo-advisories that claim they can beat the market. Are they really telling the truth, or could they be traps that take advantage of our impulsive tendencies to instant gratification? If we were to conscientiously take a step back and wisely consider, the math and statistics might tell a very different story. We need to do our research and investigate the facts, especially when some financial products promise returns that are too good to be true.


Before we go on, let’s give this quiz a go. They are of course hypothetical scenarios, so don’t try to think too much about them. Instead, go with your most natural choice and let’s see where that goes.

Were you surprised at your results? When you were attempting the quiz, did you consciously think about how much savings you could have accrued? Or was it more of an afterthought when you saw the results of the quiz? Now that you’ve taken to mind the power of compounding interest, would that be something that will affect your purchasing decisions henceforth?

Be sure to look out for our final part of this mini series as we tie everything together and discuss practical solutions to improving our financial decision making. This content was brought to you by our partners, Hive Up. Do remember to sign up for their mailing list if you haven’t already, so you won’t miss out on new content! 

Financial Wisdom in Delayed Gratification (Part 1)

Instant gratification generally refers to the impulsive decisions we make for the sake of immediate pleasure. It’s about getting exactly what we want, right when we want it. In contrast, delayed gratification is the ability to resist those impulses for immediate pleasure, in order to receive something better in the future.

Do we choose to satisfy our sweet tooth, or reap the benefits of a healthy eating plan? Do we hit the snooze button to enjoy an extra hour of blissful sleep, or wake up and commit to our fitness regime? Is the fancy pair of shoes necessary right this second, or is the money better suited for a more worthwhile investment?

We often battle with similar choices everyday, and these decisions often boil down to choosing between short-term satisfaction or being able to wait for long-term benefits.

Would you like One Marshmallow or Two?

Instant versus delayed gratification is an interesting psychological concept in decision-making, and is illustrated in a famous study called the Stanford Marshmallow Experiment. Walter Mischel, a psychology professor at Stanford University, conducted a study on children using marshmallows or treats of their choosing. They were given their favourite snack and had a choice to eat it there and then. They were also told that if they were to wait for a short while of 10-15 minutes and resist eating their treat immediately, their treats would be doubled.

Mischel went on to follow-up with these children much later on, and noted some interesting correlations. His reports, which were consistent with other recent studies, showed that those who opted for delayed gratification instead of choosing to be instantly gratified had:

  • Better academic scores and intelligence
  • Better social skills and sustained marriages
  • Higher income and better financial health; and
  • A lower probability of health issues (i.e., obesity and drug abuse)

Is it difficult to wait for a larger reward, or benefit by forgoing an immediate one? Why do some of us struggle with wanting to be instantly gratified when it comes to making decisions?

Our brains are usually conditioned to naturally choose pleasure and comfort, as well as to satiate our dopamine levels. Logically we understand it may not be the best choice, but we consciously and even sometimes subconsciously, do not want to experience the psychological discomfort associated with denying ourselves the instant reward. Sometimes, there is also the factor of probability — we are afraid we might lose the chance of getting the reward if we don’t grab it now.

Implications on Our Finances

Both instant and delayed gratification have important consequences when making financial decisions. Which end of the spectrum one leans to can be a key factor in determining one’s financial success or failure.

Daniel Kahneman, a Nobel-Prize winning psychologist known for his work in decision-making, behavioural economics, and prospect theory. He gives an interesting perspective of the implications of decision-making and its effects when it comes to finances.

Kahneman suggests that as humans, the weakness of decision-making often occurs because we are more emotional than numerate, especially when it comes to mental accounting. He notes that people tend to save and borrow at the same time, instead of treating their whole portfolio of assets as one whole.

People tend to do this because they keep their money in different mental accounts, which they have different rules for. This may not be a bad thing if the math was done right, but people often have a hierarchy of these mental accounts that tend to favour emotional desires, as opposed to the more practical and numerical needs.

If we are more prone to instant gratification, we might splurge on the latest gadget or fashion that’s on sale. We choose to only worry about the credit card bills later on. Perhaps we feel we deserve to splash our money on a luxurious vacation, instead of saving it for our children’s education. We might be tempted to heavily invest in a stock or financial product without taking the time to do proper research, due to peer pressure or us not wanting to miss out on the hype and the “rare opportunity”.

However, if we are more prone to delayed gratification, we tend to take more effort to take a step back, reflect, and consider the future aspects of our decisions and their consequences over time. We will be exploring the intricacies of what affects the choices we make and how to take better control of them later on.

Right now, let’s play a quick quiz to find out more about our own personal gratification habits. Try not to think too much into the scenarios. Be honest with the answers that naturally come to your mind, that are consistent with your everyday decision-making. Ready? Let’s give it a go!

Were you surprised with your result? Let us know what you think! Join us in the next instalment of this series to see how your quiz results compare with others.

Learn how your decision-making affects your financial decisions as we dive deeper into exploring the areas of loans and investments, and how to safeguard ourselves against common pitfalls of instant gratification.

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What is an Economic Moat?

The ‘Oracle of Omaha’, Warren Buffett has been famously advocating the importance of “Economic Moat”. Buffet seeks out companies with a sustainable competitive advantage which in turn allows for high profits and discourages from new entry.

As an investor, we want to identify companies that resemble a fortress. We want the company to continue generating profits and cash flow, even in times of a market bloodbath. The share prices of such companies often have a low standard deviation and provide consistent dividends to their shareholders.

3 Characteristics of a company with an Economic Moat:

  1. Switching Cost

    A company with a deep moat will have products and services that deter their customers from switching to their competitor by enforcing high switching cost. This cost may not only be a monetary cost, but also intangible value to the consumer. An example is the Operating System (OS) that mobile phones use. Currently, the two main players are Android and iOS. Switching from one OS to another would mean that the user will have to relearn the basic phone features and interface operations. Previous data from the native apps might be lost as well with the switch.

    This creates a trap in the ecosystem for users of a specific OS. Furthermore, with the convergence of the market, it forces other players like BlackBerry and Windows to exit the phone OS market altogether.

  2. Regulations

    Government regulations may sometimes play an important role in determining which firm will reign supreme in a particular industry. Policies are written by the government to control the barrier to entry in particular industries. In the case of Singapore, the print media is dominated by Singapore Press Holdings and MediaCorp.

    These companies have to meet the stringent criteria from Info-communications Media Development Authority (IMDA), in turn, giving them regulatory moats and deterring new entrants.

  3. Network Effect
    Additional users of a product or service would cause a positive effect on the value of that product to others.

This is evident in messaging app platforms. Chances are the choice of your current messaging platform is determined by what most of your social circle of friends are using. WhatsApp in Singapore, WeChat in China and Line in Taiwan. Being the dominant player, companies can integrate other products or services, like WeChat Pay, to leverage on the deep userbase.

PrivéTech Team

The Privé Technologies Team