I will admit that I am attracted to wealth or at least the appearance of it. My family jokes about how I am able to walk into a store and can somehow pick out the most expensive item without even looking at the prices. Even in my career, I was attracted to an industry where I could be described as a manager of wealth. However, it was not long into my career before I began noticing that there was a difference between living a wealthy life and those who seemed constantly stressed by money. Surprisingly, it had little to do with their net worth.
Being wealthy it turns out, has much more to do with a state of mind than a personal balance sheet. I have seen millions of dollars squandered while I have also seen couples live happily on incredibly small amounts. It would seem to me that the latter group is actually the one that is truly wealthy. You see, these people have found contentment in that they have enough money to live a satisfying life and it would seem that this should be the definition of being wealthy.
One of the benefits of working with so many clients is that I have the opportunity to see how each individual handles money in their own way. While there are many paths to becoming wealthy, there seems to be one particular virtue that is consistent regardless of IQ, career, or birthright. While it has taken time for me to be able to fully articulate what this virtue is, it turns out that I am far from the first to begin researching it. The virtue I am describing is that of deferred gratification.
The Marshmallow Experiment
In the early 70’s, professors from Stanford organized a simple experiment. They placed a single marshmallow in front of a young child and told them that they could have one now or they could wait 15 minutes and receive two instead. The original experiment was intended to measure what influences impacted the ability to practice delayed gratification, for example, some kind of distraction. However, what the experiment became most famous for was its follow up with the test subjects.
Years after, the test subjects were followed up and an amazing trend had occurred. Those who practiced delayed gratification during the experiment were consistently shown to be more academically and socially competent, verbally fluent, rational, attentive, planning-oriented, and able to deal well with frustration and stress. It even showed a physical correlation with a lower BMI score.
What I believe holds true for these young children has also proven true for many of the men and women I work with. When you think of saving in a 401(k), it is not that much different from choosing to wait and have more marshmallows in the future versus having one now. It appears to me that those who have chosen delayed gratification are typically the same people who are content with what they live on. They also seem to live more fulfilling lives and are thus the ones who are truly wealthy.
The good news is that if you are like me and want to be wealthy, but sometimes struggle with deferred gratification, all is not lost. Research has shown that habits like deferred gratification can grow stronger with repetition much like working out leads to stronger muscles. Remembering to balance the wants of today with the needs of the future is the first step to living a fulfilling and wealthy life.
Mischel, W., Ebbesen, E., and Zeiss AR., “Cognitive and attentional mechanisms in delay of gratification” Journal of Personality and Social Psychology, Vol 21 pg 204-218, 1972