Instant Gratification Hates Discipline

This article was featured in the canrival of personal finance edition #157 found here


I went to visit my Aunt and Grandmother this weekend and found myself drooling over my Aunt’s new toy, a 14.2 megapixel SLR digital camera. I played around with the camera a bit this weekend and found myself justifying my need for 14 mp of pure greatness. Plus I have enough cash in the bank that I could pick it up. Reality check…I don’t need the camera but I REALLY REALLY want it.

Instant gratification, the conscious expenditure of effort to make the time interval between wanting something and getting it as short as possible, lives in all of us. We must control how much reign we allow this beast to have in our day-to-day spending. Do you have credit card debt? If so there is a good chance that the beast within has control of your spending habits. Maturity is often defined by the willingness to delay gratification. Look at your bank statements. Do they reflect mature spending? Where is your money going? Or more importantly, where is your money NOT going…investments, savings, retirement? As I began the justification process for why I should reward myself with 14.2 megapixels of pure heaven the voice of reason whispered in my ear “You already have a camera that you don’t use, do you really need another one?” This my friends is the process of delay of gratification. After a short internal debate, I convinced myself the camera was unnecessary and would delay my “future house” fund.

Discipline is what separates the strong from the weak, the rich from the poor, the smart from the stupid. Are your spending habits disciplined? If you impulse buy when you see a great deal or you spend too much shopping, odds are you haven’t conquered the art of frugality. Here’s some advice to help cure your impulse buying.

1) Just because it’s “on-sale” DOES NOT mean you have to buy it. If it’s on sale at store “A” now it will be on sale at store “B” tomorrow. Be patient.

2) If you are considering using credit to make your purchase, don’t. Force yourself to save. This has many advantages. First, you don’t owe anyone money! Second, it may get cheaper during the time it takes you to save for it. Lastly, once you save up all that cash you might not want it any more because you realized just how hard it is to accumulate that much money.

3) If it’s not essential, don’t buy it. Plain and simple, the key to frugality is only buying the essentials and saving the rest.

There’s plenty of information on the web offering up advice on how to be more disciplined. My advice…get it together. No excuses, no credit, no financing, no spending when you don’t have the money. No big purchases without talking it out with yourself and loved ones. Don’t be stupid. Make the choice to live your life differently.

Be the solution not the problem,

Total Money Makeover


So I bought Dave Ramsey’s book “The Total Money Makeover” and just recently finished it. If you haven’t read it and you have little knowledge of the financial world I highly recommend picking up a copy. For those that are more finance savvy, you have probably heard everything this book brings to attention. As I continue on my journey to financial freedom I can’t help but disagree with two pieces of advice Ramsey gives.

While I understand why he discourages the use of credit cards, it just seemed too radical for me. If you have read through my earlier posts here then you know I am a big fan of using my credit card for any and all purchases I make. Throughout the whole book, Ramsey instructs everyone to cut up their credit card. Broke like a joke or Rollin’ in the dough, Ramsey says cut up the card and pay cash for everything. I will definitely be ignoring this recommendation. My credit card is free cash for one month and airline miles in my pocket. I’m pretty sure if I went to the grocery store and wrote them a 30 day I.O.U. and requested frequent flier miles in exchange for my groceries the clerk would kindly ask me to leave the store. With my credit card I can do just that. Ramsey and I are both advocates of discipline. He advocates discipline in debt repayment, spending habits, giving, etc. I just don’t get why he doesn’t mention that, with discipline, credit cards are a valuable asset. I wish he acknowledged the fact that credit cards are not a bad thing, it’s the people that use the credit cards that cause problems.

Second beef, paying off all debt (except mortgage) as fast as humanely possible. Again, I understand where Ramsey is coming from, but I completely disagree with this stance. I currently have one, and only one debt to my name. I have a consolidated student loan for $28K at 7% interest. I decided to stretch the student loan out for 20 years to lower my obligated minimum monthly payment in case I ever find myself in a financial bind. With payments of approximately $220 a month my loan will be payed off in 2027…I know pretty crappy. With interest, over 20 years, I will be paying approximately $54k for my education, that’s $26K in interest!!! My education is not worth $54K to me so there is no way I am making minimum payments. I ran some numbers through my calculator to decide exactly how much extra I want to be paying on my loan. I decided I would pay an additional $110 monthly to shorten my loan term and take a huge chunk out of $26k in interest. Making monthly payments of $330 I am able to pay my loan off in half the time and save over $16K in interest.

I’m sure with “gazelle intensity” I could pay off my student loan much faster, but at what expense? Ramsey recommends putting retirement investing on hold until all debts are paid off. If I take this advice and I postpone my Roth IRA funding for two years, while I focused on solely on paying off my student debt, my Roth IRA at 65 would have approximately $2,044,000 in it. If I ignore Ramsey’s advice and contribute to my Roth IRA from now until 65 I would have $2,434,000 in my account. That’s a difference of $390K!!! You better believe I will sacrifice paying an extra $10K on my student loans over the next ten years if it means I will have an extra $390K in my retirement account. Now one could argue that Ramsey’s advice is warranted in that the sooner I pay off my student loan the sooner I will be able to contribute additional income to my retirement accounts and can therefore make up for lost time. Need I remind you though, that Ramsey advises only putting 15% of income in to investments. I currently contribute 18% of my income. I guess this is advice that I NEED to ignore.

Overall I enjoyed my read and thought there was plenty of valuable information, but I wish Ramsey acknowledged that, with great discipline, there are alternative ways to acheive a “Total Money Makeover.” Have you read the book? What do you think? Is there something I’m missing or not picking up on?

Making money,