Applying Delayed Gratification Mindset

If you do not know what is delayed gratification, read here to find out more.

It is important for people who wish to be successful in life to have the delayed gratification mindset. Research had shown that people who are able to delay gratification are better off as compare to people who don’t. An experiment by Prof. Walter Mischel, at Stanford University, California, studied a group of four-year-old children, each of whom was given one marshmallow, but promised two on condition that he or she wait twenty minutes, before eating the first marshmallow.

Some children were able to wait the twenty minutes, and some were unable to wait. Furthermore, the university researchers then studied the developmental progress of each participant child into adolescence, and reported that children able to delay gratification (wait) were psychologically better adjusted, more dependable persons, and, as high school students, scored significantly greater grades in the collegiate Scholastic Aptitude Test.[2] More recently, the study Fetal Alcohol Syndrome: Developmental Characteristics and Directions for further Research (1994) reported that children afflicted with fetal alcohol syndrome (FAS) are less able to delay gratification; indicating, perhaps, that poor impulse control might originate biologically, in the brain.[3] Adapted from Wikipedia.

How do I start applying delayed gratification mindset in my personal finance?

1. First you have to know why you want to delay gratification and for what purpose. Is it for a better lifestyle, buying your 2^nd property for investment purpose or simply to retire comfortably.
2. Pay yourself first! Start by allocating a certain percentage of your income (I save 40% of my income) and start a savings account that automatically GIRO that amount of money every month into it. This is a powerful and often underrated method. Read here to learn more about paying yourself first.
3. If you receive an extra income that month, example your Grow and Share Package, instead of spending all of it, you can save a larger percentage of it.
4. Any increase in your income, maybe from a raise or higher commission, you can choose to save a huge portion of it while saving the same amount as before. For example: You are currently saving $500 from $2000 income every month (25% of income). Your boss decided to increase your salary to $2500, instead of taking 25% from $2500 which is $625, you continue to save $500 (same as before) plus say 80% of the increment which is $400. So in total, your savings per month is $900 which is much higher than $625 if you continue to use 25%.
   
   The reason why I suggest that you don’t use the same percentage as your income increases is because the higher the salary, the higher the percentage. 10% of $1000 is $100, and 10% of $10,000 is $1000. That’s a huge difference and you might not need that much money to survive and to enjoy. Say if you can survive with $1000 pay, and have a steady lifestyle with $4000 pay, an increase to $10,000 means that you can save $6000 more as you only need $4000 for you to survive and to maintain your lifestyle. That is the sacrifice you have to make.
5. Increase your savings (savings = income – expenditures). There are two methods to this, first is to find ways to increase your income. Either by increasing your current income or look for other sources of income (taking multiple jobs etc). Second is to reduce your expenditures, that is simply by spending lesser.
6. Invest your savings when opportunities arise, provided you already have emergency funds. Invest in places you are comfortable with, and make sure you have assessed the risk involved. You don’t want to lose your hard-earned money. Some of the areas you can invest into are ETFs, high dividend yield stocks, MMF and the bond market.
7. Lastly, be patient! Remember to delay gratification. When you receive your dividends, or gain profit, don’t be quick to spend it. Yes, you feel like rewarding yourself, but look at it this way: If you invest $10,000 in a 10% yielding instrument, every year you receive $1000 and if you decided to reinvest that $1000 back, the following year you will receive $1100. And ten years later, you will receive more than $3000 every year. That’s the power of compound interest. But if you do not reinvest back, you will only receive $1000 forever.

In the end, don’t forget your purpose of doing this, if it is to buy a property, do it! Remember, you are doing it for your future; a minor sacrifice can reap a major harvest. But don’t delay gratification forever. Even along the process of delay gratification, you can still choose to enjoy it! Even though it is tiring, I am enjoying the whole process now. I believe one day when I look back, I will thank God that I chose to do all these.

Delayed Gratification Mindset

It has been a while since I blogged. I have been extremely busy for the past few weeks and I hardly find time to relax. It’s like having multiple jobs at the same time, I have to work, teach guitar, do up a video trailer, design a website and create a web application. With all this work that I have to handle, I feel like I am wearing out. Every day is the same routine…

But, the thing that kept me moving on is this mindset: Delayed Gratification.

What is delayed gratification?
It is the ability to wait in order to obtain something that he or she wants, aka 先苦后甜 in Chinese. A simple illustration is, say a man strike 4d and won $1 million. He decided not to spend all the money on things that he wanted immediately, but instead, he invest it into bonds and shares and wait a few years before tapping into it. On the contrary, if he spends all his money, that is called “instant gratification.”

With this mindset of delayed gratification, I have learned to work hard now and not enjoying all of the rewards immediately. But instead, using the rewards to reap even more rewards. There is no doubt that the main reason I am working on multiple projects are for the sake of money. And with the different stream of income coming in, I could have spent more on my wants. But I did not. Instead, I choose to save the additional amount of money that came in. That does not mean I don’t enjoy at all, but I kept it at a minimum.

So why do I want to do that? By saving up first, I can build up a substantial amount of money that acts as my opportunity fund that I can use to invest. It’s like building up my army (capital) to fight and to defend when the time comes (market crash). Imagine not having enough soldiers when your enemy is weak, you miss the opportunity!

Read on how you can do that and apply delayed gratification

Don’t be short sighted, look far ahead and plan beforehand. This will ensure a better future for you and your family.

Yuan Revaluation Is Win-Win for China-U.S.: Lee Hsien Loong

By Lee Hsien Loong - Jan 5, 2011 1:00 AM GMT+0800
Extracted from http://www.bloomberg.com/news/2011-01-04/yuan-revaluation-is-a-win-win-for-china-u-s-lee-hsien-loong.html

The world has recovered remarkably quickly from the financial crisis. But growth is now on two tracks: developed economies still struggling with fiscal, financial and structural problems, while emerging economies, especially in Asia, are growing robustly. The resulting global imbalances have created international tensions.

The Group of 20 has emerged as a forum to tackle these issues. It was especially effective during the crisis, and remains valuable as it is more inclusive than the G-8.

The most consequential relationship in the world today is between the U.S. and China. There has been significant friction, notably over exchange rates. The yuan issue is politically hard -- the U.S. sees an undervalued Chinese currency as unfair competition, while China fears that sharp revaluation will disrupt its economy, causing unemployment and unrest.

But from an economic point of view, this needn’t be a win- lose battle. A gradually appreciating yuan will encourage Chinese export industries to restructure and upgrade, help distribute the gains from growth more broadly beyond exports to the rest of the economy, and mitigate inflation, which is a growing problem in China. At the same time, it will help ease political pressures in the U.S. and tensions in the relationship.

The U.S. and China need to build mutual trust, in order to cooperate on a range of tough international issues, includingIran’s nuclear program and North Korea. Otherwise each side will doubt the other’s motives, especially when problems arise, such as over competing claims in the South China Sea.

Pre-Eminent Superpower

The world is witnessing a gradual shift in the relative balance of influence and economic power. The U.S. will remain the pre-eminent superpower for decades. But Asian countries see and sense China’s growing influence and are adjusting their stances to benefit from that nation’s growth and to consolidate their relationships with China. Yet almost all of them wish the U.S. to stay engaged in Asia. They want to be friends with both the U.S. and China, and not be forced to choose sides.

The Chinese are aware of foreign perceptions that with growing strength it has become more assertive. China’s leaders have emphasized that the country is committed to peaceful development and has no aggressive intentions. China’s domestic challenges are numerous and daunting. Its government must uplift hundreds of millions who remain in poverty, create social safety nets for its people, moderate major disparities in wealth and development, and maintain social and political stability so that progress can continue.

Chinese Leadership

No less than the U.S. or other democracies, China has its own domestic politics that it can’t ignore. China’s leaders need to explain this reality, and their basic thinking, convincingly to international audiences, who see Beijing and Shanghai and think that is China. But countries will also watch China’s actions -- how it conducts itself on international issues such as climate change, and what the leaders say to their own people on China’s role in the world.

As world economies recover, governments must continue promoting global trade, to deepen the international division of labor and foster long-term prosperity for all. More immediately, the win-win results of freer trade will give a badly needed boost to demand and growth. During the crisis, protectionist pressures were a real worry. Fortunately, governments took fewer protectionist and retaliatory actions than many feared, but they also made very few positive trade moves.

Trade Tensions

In the U.S., there is little political appetite for free trade; hence the slow progress of its bilateral Free Trade Agreements and the World Trade Organization’s Doha Round. But there are some recent positive developments. The renegotiated free-trade agreement between South Korea and the U.S. was settled recently, though not yet ratified. The U.S. is also one of nine Asia-Pacific countries negotiating a Trans-Pacific partnership, which will be a pathway toward the Asia-Pacific Economic Cooperation’s vision of a free-trade area of the Asia- Pacific region.

Countries shouldn’t rest there. Leaders need to persuade electorates worried about unemployment and apprehensive about the future that free trade will benefit them in the long term. Globalization poses significant challenges to countries. Competition is intense, change is continuous, and the fruits of prosperity are unevenly distributed. But trying to shut out competition or freeze the status quo will fail, nor will currency realignments create real, sustainable prosperity.

Investment in Skills

The only reliable strategy for improving the lives of citizens is for countries to upgrade the skills of their people and the capabilities of their economies. This means educating the population to enhance their earning power, investing in technology and infrastructure to raise overall productivity, developing new industries to replace declining ones, and constantly adapting to stay relevant in a changing world.

Beyond promoting growth, governments must build political support for free markets and economic integration. Growth has to benefit the many, not just a few. The state needs to tilt the playing field in favor of the less successful, and those having difficulties keeping up. But it must do so in a sustainable way, without undermining the human drive to do well and get ahead. This is what Singapore is striving to do, to improve its people’s lives and advance as a nation.

(Lee Hsien Loong is the prime minister of Singapore. The opinions expressed are his own.)

To contact the writer of this column: Lee Hsien Loong at pmo_hq@pmo.gov.sg

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net