Delayed Gratification

If we do not know how to handle the "small" money, we will never know how to handle the "BIG" money.

My nephew, when he was 7 years old, would save his "school canteen" money (for snacks) and not have anything to eat during class-break. My nephew would keep the money, and after school would go and spend it on toys at the street corner shop. His father was not a happy man. He was afraid his son could face starvation. But the little boy had actually shown a very good FINANCIAL HABIT. The habit of DELAYED GRATIFICATION.

"Delayed gratification" is the opposite of "instant gratification". 'Delayed gratification' means that we are disciplined enough to wait until we have the money before we buy anything.

Lack of this discipline of delayed gratification is the root cause of the catastrophic FINANCIAL TSUNAMI that has hit America in September 2008. People buy houses when they have no financial strength (i.e. spare money to pay) in case the interest rate goes up. People think that they can sell their homes at a higher price because house prices for the past 10 years had been increasing annually. Some became speculators. The bubble burst, and they all come falling down. Just like ... Humpty Dumpty sat on a wall, Humpty Dumpty had a great fall, All the King's horses, and all the King's men, Couldn't put Humpty Dumpty again. Together with the greedy bankers who wanted to make money at all costs.

This problem can also be seen in those people who use credit cards for their purchases, and make the minimum (5%?) payment. I have friends, one a medical doctor and another a university lecturerwith a PhD in engineering, who think it is cool to pay the minimum monthly amount on their credit card balance. Don't you think that they are not using the full potential of their IQs?

If you have $2,000 of credit card debt at 18% per annum interest, and you make the minimum monthly payment only, how much in total would you have to pay? And for how long (to clear the debt)? What is your answer? [One answer estimates it as $4,600 and more than 18 years (yes...years (not months)]. Do you think it makes good financial sense?

Some studies a couple of years ago estimated that the average American owes $8,400 in credit card debt, and 20% had zero (de nada, zilch!) $ in the bank! Now we wonder why Bush has to pump US$700 Billion this week into America's financial system. By the way, do you know of a friend or neighbour (or anyone else) who has zero bank balance (some even have a negative balance...they are the exceptionally exceptional!), especially just before payday?

Moral of the story? Delayed gratification will help you gain financial stability. Pay all your credit card debt in full at the end of the month; it will save you a lot of money. It may well avert a personal financial disaster (bankruptcy!). Don't be shy... go to the bank and make the payment now!

I wish you Success in all your undertakings, and Good Health and Wealth to you and your family. Take care!