Tag Archives: delayed gratification

My Grad Commencement Address: About Marshmallows


If I were doing a commencement address at some graduation this month, it’d be about marshmallows.

That was a Stanford experiment in the late ’60s, that’s been proven to be incredibly accurate, and replicated right up to a few years ago. Researchers gave four to six year olds a marshmallow, pretzel, cookie, or some treat the kids really wanted. They then told the kids they could eat it whenever they wanted. But if they waited 15 minutes, they would get another one to double their treat.

It turns out that this delayed gratification was a powerful and accurate indicator of their marks, their education level, their weight, and their financial success as adults.

Maybe the marshmallow test for graduate age people is 15 days before making impulse decisions. Maybe it’s leaving the credit card at home during the week. Maybe it’s the most powerful financial tool of paying yourself first in savings before spending, or maybe it’s too late, and they’re doomed anyway.

Broke is the new rich. That was the T-shirt a 20-something guy wore at a festival. His age is certainly right in that thinking – even though it’s so wrong and so self-destructive. The millennial generation age 18 to 35 can be forgiven for wondering if they’re ever going to get any financial traction. There are over 85 million of them in North America who, on average have less than $1,000 saved.

There’s a great quote from Shaquille O’Neal: “It is not about how much money you make. The question is are you educated enough to KEEP IT?”

You may think that the average 20 something can’t get ahead. Yes you can! Get your debt under control, or have the delayed gratification to not get into debt in the first place. Start with your first paycheque, or starting this week, have two percent taken right out of your account and transferred into investments. There’s no chance you’ll miss that $60 or so. Then, every six months, up it by one percent. Again, you’ll never miss $20 or $30 until you’re saving 10 percent. Every hundred bucks saved is nearly $9,000 when you retire.

But that’s a BIG marshmallow test that only one or two people from a grad class will embrace. If you’re one of those few people, or want to be, read four short chapters in the Money Tools book and you can get really pretty quickly and easily. If not, remember me as you’ll want to email me in a decade when you’re broke and need help.

The mark you get on your lifetime financial learning isn’t an A to an F. It’s measured in your investment account balance and your debt, and you get a new mark every month for the rest of your life. It might be a mark of minus 30,000 in debt, or a mark of plus $45,000 in investments…

The Huge Payday of Today Savings

Trying to save money for the long-term when you’re in your 20s is kind of like the challenge with climate change. We know we need to, or should, do something, but we’re not really willing to pay a price to do it. Why? Because the payoff is so incredibly far down the road, and most people don’t want to make many today sacrifices in order to achieve it.

Yes, there’s a price to pay to set aside savings. It’s the stuff you’ll need to give up right now in order to have the investments way down the road. And that’s a value judgment where the long-term typically loses out to the “today” spending.

That’s the reason it almost has to be savings that come directly out of your bank account automatically. You can’t spend it if you don’t have it. My biggest financial regret is definitely not saving a few bucks every payday into an S&P ETF (electronically traded funds) index fund. Set it and forget it, because it’s a basket of the top 500 companies where you now own a tiny piece of each of them. That’s great diversification and it’ll take you less than 30 seconds to search that the S&P historical returns over the past 50 years are over 10%.

One more way to save, or likely to pay off about half your student loans in a year is also in the Money Tools book chapter called: Broke is the new rich.

If you’re graduating from university, you’ve had two or four years of living on mac and cheese. Now going into the work force with a paycheque, you have an incredible pent up demand for spending and buying stuff that you really couldn’t and didn’t for all those years.

However, if you just live like a poor student for one more year, you’re not really make any lifestyle adjustments. You’re just living on very little money for one more year. If you can do that, you’ll be able to pay off a ton of your student loans in the coming year. Only one problem: Stay on your tiny student spending plan. Once you have a credit card, bought a vehicle, stepped up for some nicer furniture, or moved to a nicer place, it’s next to impossible to give all that up again.

Maybe two or three people in your entire grad class will do what we talked about the last four weeks. I hope you’re in touch with one of them for the next couple of decades as you watch them become incredibly successful financially…

Three Must-Do Tips for Any Grad

Ah, it’s grad season for two groups: those graduating from high school and heading into the work world or university, as well as those just now graduating from university.

When I ask any adult when they were last debt free, the answer is almost always that they haven’t been debt free since they were your age. When they were 18 or 19 – and they’ve been in debt since then. Sad but true – that’ll be you.

Getting wealthy comes much easier if you learn to say “I can’t afford it,” and spend less than you earn. When you were still in high school, you probably had a summer job or other income. You worked hard, had a goal of what you wanted to do with that money, saved like a dog, and paid cash for stuff. Plus, because you had so little money, you were careful how you spent it, right?

But now you have a paycheque, and access to borrowed money, which includes student loans and a credit card. So you’ve forgotten how to get rich already and you’re just getting going. Let me remind you again and maybe, just maybe, you’ll do these things to actually get rich, instead of just making that your 40-year dream:

Pay cash for stuff

Don’t buy crap you can’t afford and don’t need

Save ten percent of your money

Maybe someone in your family will print this out for you. Maybe someone cares enough to go over to Mosaic and get you the It’s Your Money book. Maybe I’ll see you at the top, or maybe I’ll get an e mail from you in five years or so to help you with some of your financial mess.

If you’re graduating from high school, it’s a valuable investment to establish credit. Read the chapter on how to do that and the credit card chapter to understand the rate, perks and limit traps that you’ll be dodging a lifetime.

Plus, leave your credit card at home – don’t pack it in your wallet. The first time you charge a consumable such as gas or food on your credit card and do not pay it in full when the statement arrives you’re in financial trouble. From there, it’ll just get worse. Miss paying off your balance and it’s twice as hard the following month when the balance has likely doubled. Then, the credit card companies have won and have you hooked for the next few decades.

If you’re just graduating from university, I bet you’re sick of living like a poor student and ready for some major spending. The biggest financial damage is done in the first year following graduation. Get the job, get the paycheque, but if you can delay gratification and live like a poor student for one more year, you’ll have an incredible amount of money saved in that year. Once you turn on the spending tap you aren’t going to be able to turn it off again – so just delay it one year.

Finally, there was a great article on the ten choices you’ll regret in 10 years. It includes avoiding change, trying to impress others, and giving up when the going gets tough. I’ll post the link on the yourmoneybook.com site. You should add one more: Not learning from your financial mistakes by denying them…


College and University Grads: Hold Off Spending For One More Year

Student loan debt in Canada is over $14 billion. It grows at over $1.2 million a day and adds 360,000 students a year, and tons of that $14 billion is saddled on people who are graduating this year.

College and University students should be well familiar with the phrases ‘short term pain for long term gain,’ and the concept of delayed gratification.

That’s because they usually don’t have much of a life, and certainly not a lot of money. They were just smart enough to get a degree and live like a poor student, for the benefit of a better income, with more education, down the road.

The downside is that some of the most broke people are those aged 25-35. That delayed gratification all ends, for most of them, with their first paycheque after graduation.

Usually, however, that poor student life tends to end immediately when they start getting a paycheque and spend like crazy – because they now have some actual disposable income. In fact, THE most broke grads, for the next decade, are lawyers, doctors, and pharmacists. Their income is generally significantly above average and they spend way beyond that.

But delay the big spending spree of the cool plasma TV, the new car, a ton of clothes, and the good furniture for a year. If you can live like a poor student, and keep that mindset for one more year, you’d be amazed what happens.

If you spend like you did in school for one more year after graduation, you’ll clear up at least half of your student loans. If you didn’t have any, you’ll have a savings fund of $10,000 to $15,000 in just one year. For anyone with student loans, they’re not something you really want to have around for the next two decades. It’s pretty depressing to have to send that payment each month, year after year after year. Get on with it and get it over with. 10-year old pizza isn’t very attractive. Neither is a 10-year old debt.

It’s a life-changing decision you can only make once: Take on rent, car payments, a bigger credit card balance, the usual work-related expenses, AND the hangover of the student loans, or press the spending pause button for a year. If you choose the former, ask some grads from the last few years what financial stress is like. If they’re honest with you, it’s not a place you want to be for the next decade or longer. But it’s always a choice.

Ease yourself into the world of big-time spending. It’s not your job to turn the economy around in the next few months. If you delay that need to spend like crazy for another year, it’ll be so worth it. If you don’t, I guarantee that years from now, you’ll tell your kids to do exactly what I’m suggesting to you right now.