Delayed gratification is making sacrifices now to enjoy the benefits later. Delayed gratification is worth discussing in an age where instant gratification is the norm, not the exception. Delayed gratification feeds into the ability to manage your finances in a better way. It can control the gambling instinct, the decision to persist with your savings strategy when the market is collapsing, the resolve not to compete with the neighbours or social circle, the discipline to save for your retirement. It can yield tremendous returns if you can exercise self-control and tolerance for waiting.

David Laibson, an economist at Harvard University, shared his insight. “Our emotional brain has a hard time imagining the future, even though our logical brain clearly sees the future consequences of our current actions. Our emotional brain wants to order dessert and smoke a cigarette. Our logical brain knows we should save for retirement, go for a jog, and quit smoking.”

Practical ways to practice delayed gratification.

Delayed gratification is a much more sensible route, and probably easier, when you have a sense of purpose. It will help give you the tenacity to harness self-control when it comes to your finances.

Write down your goals as clearly as possible. When you have articulated and understood what it is you want, you will be empowered to delay gratification. Since you will always grapple with limited finances but unlimited spending opportunities, you need to prioritize what is important.

Have a vision of what you are saving for. A life with too much self-control can be as unfulfilling as one with too little.

Reward yourself. Give yourself leeway to splurge occasionally. You can cut down on eating out, but don’t give it up altogether. Or maybe your goal is a reward, like a great vacation. Do what works for you; don’t follow blind suggestions.

In “The Joys of Compounding”, investor Gautam Baid discusses this concept specifically with regards to disciplined investing. Here are a few insights from the chapter titled The Key to Success in Life in Delayed Gratification:

In equity investing, it pays to have a long-term view. Equity investing is like growing a Chinese bamboo tree. One should have a passion for the journey as well as patience and deep conviction after planting the seeds. The bamboo tree takes more than 5 years to start growing, but once it does, it grows rapidly to 80 feet in less than 6 weeks. In the initial years, compounding tests your patience and in later years, your bewilderment. The ability to have a long-term orientation is now a bigger advantage than ever before.

Embracing deferred gratification is what leads to the single biggest edge for an investor. Human nature makes it very difficult to utilize this edge. This difficulty is the very reason the edge exists, and since human nature will never change, this edge is a durable one for those who possess the right temperament to capitalize on it. The ability to delay gratification is a better indicator of future success than raw intelligence because the former is an important part of emotional intelligence. The short-term mindset that is all-pervasive in the market creates lots of irrational buying and selling for all sorts of reasons that have everything to do with the short-term direction of the stock but nothing to do with the long-term value of the business. Since the financial community has an ever-increasing focus on the next quarter, a long-term orientation is a structural competitive advantage for an investor, one that is likely to strengthen over time.

Charlie Munger: “Great investing requires a lot of delayed gratification”. It’s worth pondering on this, as against instant gratification, as it has reverberations on every aspect of our financial lives and is the prime key to building wealth.

Source: https://www.morningstar.in/posts/54350/lost-art-delayed-gratification.aspx