Saturday, 31 October 2015

Vol #1, Col #12: Your Fiscal Future

02_11_2008 - 15.30.48 - TIMNEWS - ST-Marshmallow-08vc26251.jpg.jpgI recently experienced two very different conversations with two very different friends. While one ended with me affectionately quipping, “welcome to the world of adulthood,” the other’s grand finale made me feel like a mother scolding her child. The irony? The subject matter of both conversations was exactly the same.
Conversation one occurred between myself and a fellow musician who I’ve got quite a number of years over. He’s been popular and successful in the scene for some time now: winning awards, selling out shows and even being allocated grant monies.

While all of this looks fab on paper, anyone whose passion is artistic in nature knows that especially in today’s economic times, it’s become increasingly unfeasible if not impossible to make a sole living via this means. The fact that Lady Gaga, arguably the current biggest thing in music (for better or for worse) has declared bankruptcy after EVERY SINGLE ONE of her past four tours speaks for itself.

Although my friend has more than got the goods, he’s come to the conclusion that he needs to develop a sound financial strategy to better cover his day-to-day living expenses, which in turn will allow him to continue to fuel his passion without burning out. Accordingly, he’s decided to go back to school for retraining in an unrelated, but stable field and is currently working two jobs.

Conversely, conversation two erupted after I invited a girlfriend of mine to attend a couple of trial yoga classes with me, being offered at a mere five bucks a pop. Now I understand that given the job market is, particularly in this city, less than optimal right now, many of us are scraping to get by, but frankly considering my aforementioned friend still lives at home rent-free and works full-time, I couldn’t comprehend how it was possible she claimed to not even have $5 to spare to take part in an activity in which she’d expressed interest on more than one occasion.

I began to grill her – asking her to outline for me in detail exactly what her expenses were on a monthly basis. Not surprisingly, because she admitted to frequently shopping when she was either bored or in a bad mood, she was spending exorbitant amounts of money unnecessarily and had yet to put any substantial monies into savings (translation: she was living paycheck-to-paycheck).

It’s not that friend number one was/is more analytical or intelligent than friend number two, nor was/is age (as in years) the distinguishing factor; something confirmed by the fact that friend number two is actually older than the both of us! Their differed perspectives simply come down to sight, with my latter friend suffering from a serious case of psychological myopia. This, of course, brings us to today’s topic of discourse:

Financial goal setting (well life goal setting, in general) via the practise of “delaying gratification” is a MAJOR aspect of developing psychological maturity, and I’m not just saying this ‘cause my pops happens to be a insurance broker.

Defined by the Encyclopedia of Psychology as, “the ability to forgo an immediate pleasure or reward in order to gain a more substantial one later,” learning to delay gratification goes hand-in-hand with learning to enhance one’s self-control. Psychologically-speaking, the problem for many of us stems from the fact that society promotes self-motivation and personal responsibility as desirable personality traits to possess, while at the same time suffocating us with advertising campaigns promoting indulgence and frivolousness, suggesting we can “have it all”. The fact is this: no, you can’t. As I learned a long time ago and hope to impart onto you, anything that is worth fighting for will NOT come without its challenges and small sacrifices are NECESSARY in order to achieve large payoffs.

Developing self-control is only possible once one is able to identify the emotions and motivations driving his/her behaviour(s). Notice once again how it always comes back to good old introspection! It is true that some people are genetically hardwired with poorer impulse control, however even they can learn how to delay gratification with some practise. “Suppression” (ie: putting the steps toward accomplishing one’s goals out of mind) is actually useful here. For instance, if one sets up an automatic monthly transfer of a set amount of funds between their chequing and savings accounts, they are more likely to save that money than if they were physically making the transfers themselves.

After this, it’s all a matter of goal setting and “global processing” (ie: focusing on the big picture – your ENTIRE life). Importantly, goals that are defined using measurable and concrete terms (ie: I want to have X amount of dollars in savings by the time I reach X age) ensure a higher likelihood of staying on target.

Sidenote: Do NOT, I repeat do NOT, change your spending habits until you reach your goals, even if in the meantime you’ve got yourself a snazzy promotion; this is a major pitfall too many fall into. Goals most certainly change throughout your life, but the road to them, one that is slow and steady, should not.

While it’s totally fine and common to give yourself small rewards along the way for sticking to the program, you don’t want to let these rewards get out of hand thereby undermining the bigger objectives you’re working toward. Great ways to keep yourself in check include: practising meditation and internal coaching (ie: self-talk) as well as drawing “mental equivalences” each time you feel compelled to impulse buy (ie: one of this item is equivalent to X of this item, which would I rather have?). Monitoring your progress, too, is in it of itself motivating.

As students of psychological maturity, we essentially need to learn to turn OFF our natural (and socially programmed) tendency toward “temporal discounting” and turn ON the process of “metacognition”. In other words, as psychologist Walter Mischel puts it, we need to master the skill of “strategically allocating our attention.”

Financial experts report that anymore you need at least a million bucks (yes, you read correctly) in the bank by the time you’re 60 to ensure a comfortable (NOT luxurious or extravagant) retirement. That ain’t just gonna happen over night and I wouldn’t hedge my bets on the lottery!

Aside from helping you learn to save, Mischel’s 1970s “marshmallow” experiment on the subject at hand revealed a notable correlation between higher levels of self-control and better life outcomes (ie: higher marks in school and higher paying jobs) as well as lower incidence of risk-taking behaviour and the development of personal vices such as: drug addiction and overeating. In sum, learn to delay gratification – it’s not just money in the bank!

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