There was once an experiment done with young children offering them one cookie now, or two cookies later (perhaps after a nap or bath).  In the majority of cases the youngster accepted the one cookie immediately thereby proving that one cookie in the hand is worth a lot more to them than two cookies in the distant bush.

Of course, this is the major premise of credit cards and other buy now-pay later plans that can get a lot of people into financial trouble.  But there are other ways that instant gratification grabs hold.

For example, in my many banking years I sold hundreds of RRSP loans.  The premise was that once the tax refund was received, the loan was paid off.  Or, alternately, if no loan was required, the refund would be applied as a lump sum payment on the mortgage.  We all know this theory.

However, I saw very few people (hardly anyone really) who actually did this.  It seems that as soon as the tax refund was in hand there were a lot of other, more desirable, ways it could be spent.  After all, the monthly loan payment is affordable, and you hardly see the decrease in the mortgage balance.

A common budgeting practice is to annualize the cost of your small indulgences and vices.  You can see that your daily specialty coffee comes to $1200 and your weekly carton of cigarettes cost you $4000, etc which could be the start of (or added to) an investment portfolio or put toward another goal.  But it’s really difficult to see the big picture – it’s so far away and one drink (this time only) won’t make much of a difference.

I have a friend, let’s call her Gladys, who is over 65 and whose only income is her pension and a small salary from working ten hours a week as a sales clerk.  Since retirement, Gladys, with a seniors group, has travelled all over the world.

She is currently on a six-week tour of China and surrounding countries and in the coming years she plans to take an African safari and travel to the South Pacific.  She has admitted that she has made a lot of daily sacrifices in order to afford her trips, but you should see her face glow when she talks about where she has been.  This is a dream of a lifetime.

Related: Why Do We Save?

This story shows that you have to have a very compelling goal to work towards that’s always in the back of your mind so that it’s easier to walk away from that cookie when it’s offered.  Otherwise, you’ll be constantly wondering where your money went and complaining that you can never afford realized your future dreams.


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