# Punch Impatience In The Face

(guest post by William Cowie

## Debt is nothing but impatience.

To prove this mathematically is easy. After doing that we’ll look at some of the intangible costs and what to do about them.

## A.  The Math

### 1. Interest

Let’s say you want to take a cruise and it costs \$5,000.

Let’s say your budget allows you to pay \$200 a month. If you save with zero interest, that’s 25 payments, a little over 2 years. If you put in on a credit card, it will take you more than 30 months to pay it off — 5 extra months of making payments. Only because of interest.

Note the only difference is time: cruise now or cruise later. Same cruise. The only reason you’d spend an extra \$1,000 is impatience.

### 2. Other Money

It’s not just interest you save with patience. A year ago the iPhone 4S was the hot thing. It was a good product last year and it hasn’t changed. The only thing that changed is what we think of it. Last year we thought it was hot stuff. This year it’s passé. But cheaper.

Same with movies. If you wait a year or two you can see today’s hot movie for a dollar instead of \$20. The popcorn is a lot cheaper, too. The only difference is time.

## B.  Intangibles

### 1. Freedom

So, impatience is expensive. It gets worse.

If your mindset is “buy now, pay later,” you never do it for only one thing. You’ll do it for more than one item until your life consists of “making payments.” Every month it’s the bills, and: can I make it?

What if your job sucks? Can you afford to quit and look for a better one?

No.

Why not? Your freedom to do the thing you want is gone. Because you need to make the payments.

### 2. Opportunities

Foregone opportunity is another hidden cost of impatience. For example, a neighbor is forced to sell their home while the market is really bad. You know, everyone knows, the market will recover, because it always does. If you jump you can get a killer deal. But if you’re in debt you can’t. You miss out on the opportunity to make another \$50,000 or more, without any extra work. Because you were impatient.

These less obvious costs of debt are often a lot bigger than the obvious ones.

But they all boil down to one single thing: impatience.

## Debt Is Nothing More Than Impatience

How impatient are you? Chances are the answer will tell you how much of a problem you have with debt and spending.

It’s a lot easier to catch a snake if you cut its head off. Same with debt. If you punch impatience in the face you have a much better shot at killing the debt monster.

Remember: it’s the same payment every month. Either you pay a bank or you pay it into your own savings or investment. One way is the way of freedom and the other is the way of servitude. Same payment. The only difference is impatience.

Don’t you want to have more money and have more freedom? Without having to win the lottery?

## Punch impatience in the face.

How do you do that?

### 1.  Watch What You Watch

Yes, the new iPhone 5 is the hot thing and everybody’s talking about it. Everywhere you look there’s a new article about it.

Don’t read it. Why not? The more you read about it, the more you’ll want it. It’s human nature. Find other things to read and watch. Don’t make it hard for yourself. Just find something else.

### 2.  Change Your Interests

One of the big benefits of being patient and having cash is you can pounce on terrific opportunities. If you have cash you are in the minority, so there’s not a lot of competition where you operate.

But the nice deals aren’t on billboards; you need to hunt them down. By starting early and playing hard to get, you’ll eventually know where the good deals hide out. Start by going to foreclosure auctions. See how they work. Get a feel for what to expect, what’s reasonable and what not. Talk to the other people there. Find out where they go to find deals. After a few months of lurking at these places, you’ll begin to get a feel for what’s a bargain and what not. And sooner or later there will be one that others pass on because they have other interests.

Picking up a foreclosed home, then renting it out for a year and selling it for a \$70,000 profit brings an entirely different class of jolly than having the latest gadget or putting a cruise on a credit card. But it takes patience. After you’ve done it a few times, you can take a cruise around the world on the QE2 and still have money in the bank.

If you still want to.

### It All Comes Down To Redefining Fun

It’s very simple: impatience carries a premium, patience carries a discount. Which do you prefer?

And the benefits of impatience are often very fleeting, while the benefits of patience last a lot longer.

Punching debt in the face starts with knocking out impatience. Here are your gloves.

William Cowie is a retired businessman spending his time coaching everyone who wants to listen about managing their money on his Drop Dead Money blog.

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### 31 thoughts on “Punch Impatience In The Face”

1. I am a big fan of the envelope system of budgeting. I’ve been using it since 1997 and it works great for me. I work in an industry that filled with young people. The job is usually their first job and the job does provide a steady paycheque. The rate of pay is not very high but with careful attention, one could pay all their bills and build up some savings. Sadly, most of the people around me were constantly broke while I socked away my savings.

Sometimes someone who ask me how I did it and I explained the envelope system. If the cash discretionary for spending is gone, then there is no more spending until the next pay day. Simple as that. The envelope system, forces patience. I always offered this advice, “try it for 2 weeks and if it does not work for you, well, it’s only 14 days of your life “wasted.” I probably explained the envelope system to at least two dozen people in 15 years. Only one followed my advice. Sadly, the other people did not have the patience to something new for 14 days.

2. I love the envelope system. It totally works if you follow it. We used to have a big manila envelope for the “leftovers” from the others at the end of the pay period. Once you build the habits, the actual envelopes become redundant, but it’s a great way to get started.

3. Maybe consumer debt is all about impatience, but what about student loans? There’s a massive opportunity cost if someone were to delay their college education until they could pay for it in cash.

• No doubt. There are several ways to mitigate student debt, though:
– scholarships (getting them takes hard work, but they’re there and can help)
– work while you study (same thing, different flavor)
– taking a lighter course load over more years while working
– using community colleges to complete the first two years at a low cost before transferring (not available everywhere, but are in many states)

None of the options is painless, but getting and staying out of debt rarely is.

• Your suggestions are generally very good for “minimizing debt”, but I don’t think it’s realistic to tell current college students that they will all be able to completely stay out of debt. A lot depends on your earning potential before college, and how much financial aid you get.

• You’re right. The gist of the post was aimed not at student debt or a first mortgage, it was really more aimed at the \$2 trillion dollars of discretionary debt: credit cards, equity lines and auto loans. That is a lot of money. If it was put in front of you in \$100 bills, it would take you 634 years non-stop (no sleep, eat or potty break) to count those bills. That’s an incredible amount of money. And most of it (not all, but the vast majority) is incurred because of impatience in one form or another.

And a lot of the, let’s call it the hard core debt (first mortgages and student debt), have levels that could be mitigated by less impatience. For instance, buying a smaller house now and waiting to get the nicer one later. Or taking a lighter class load and stretching a degree course over more than 4 years. There are many gray areas and options, each of which trades patience for debt.

Bottom line: all debt imposes pain in one form another in the future. To mitigate that future pain, there may be many unexplored opportunities in the present (involving patience) that can reduce that debt and therefore that future pain. As Meryl Streep would say in The Devil Wears Prada: That’s all.

• I actually disagree with Becca. Your suggestions for how to deal with college loans are right on and can help a person stay out of student debt entirely. People really underestimate how many scholarships are out there. Yes, it takes a LOT of time and engergy to apply for as many scholarships as you would need to get out of college debt free, but I am proof that it is possible. I went to a state college for my 4-year nursing degree with \$4,000 in loans. I was decent student in high school(nothing spectatular) from a middle class family. I worked all through college and in high school and saved like crazy. It just takes time and the college bound person needs to WANT to do it.

• Now you’re backsliding. The article was entitled, “Debt is nothing but impatience.” An absolute statement. There was nothing in the original comment to distinguish consumer debt from student debt or a first mortgage.

4. SWR brings up the biggest hole in William’s argument: the need to finance large purchases that all but a few of the most affluent can afford to pay all in cash. These can include car loans, mortgages, and student loans. Don’t get me wrong; I don’t favor paying interest on small purchases for which one is better saving for. I absolutely support the idea of making a large down payment on a house or working to help pay for college. I never took a trip to Europe without having the cash on hand or being able to pay off the credit card without interest. But the average person is not going to have \$200K available to buy a house, and can’t wait 10 years to have enough saved for a college education. So a certain amount of debt on large purchases is almost inevitable, and accusing others of “impatience” in this regard seems to me way off base.

• It is still impatience. Not everyone needs a 200k house to start off with. You can save less, buy a house, keep saving and switch up and up. Same thing goes with a car. If you get a running car for cash, you can move up and up, every 10 month or so you could have double the car. Instead most people pay almost the same amount in interest as they do on the actual car or house.

• “It is still impatience.”

And I say, not necessarily so. What we’ve got here in William is a “debt ideologue,” someone who is taking an attractive-sounding, rigid position that accords with the current vogue of Dave Ramsey-style self-flagellation if one takes on even a penny of debt. By the example of his own mortgage, William cannot avoid his own so-called “impatience.” Because “impatience” is a reductive, simplistic, often inaccurate way of characterizing what can in fact be an entirely rational way of acquiring a useful asset like a house or education.

5. Larry, I agree. I have a home mortgage, but I know I was too impatient to wait till I was 95 before I could buy a house — at least that’s how I felt when I did it, and I’d probably do it all over again. 🙂 Let’s just be honest: there probably isn’t a person in the world who is perfectly patient about everything. So there is no accusation in the post, at least none intended.

But…the country has more than \$2 trillion dollars of debt only in the categories of credit cards, equity lines and auto loans. That’s a lot of impatience right there…

• “So there is no accusation in the post, at least none intended.”

But there is, the reason being that you’re making an assumption about personal attitude, rather than the possibility that entering into a certain degree of personal debt may be a rational decision in which the benefits outweigh the liabilities. Let’s say you tried to save until 95 to buy your house. How certain can you be that this money would remain earmarked for the house and not used for other purposes, how certain can you be that entering into a mortgage now might not be cheaper in the long run (thanks to the beneficial effect of inflation on your interest payments) than waiting?

I took out a car loan a couple of years ago at 3% because (a) my last car, 11 years old and still running fine, was rear-ended and totalled, (b) because I put 40% down, and (c) because I didn’t want to buy a used clunker. The car is likely to be paid off in a year or so. No impatience involved, just a rational financial decision.

6. This is one of the best PF blog posts I have read in a long time. Thank you.

7. William, you are a genius. Never thought about debt this way! Thanks for the article.

8. Another great post William – I especially like the last part – ‘If you still want to’. We are a generation who do not know what we want other than we want what our friends have and we want it now. The internet has given us instant access to almost anything with the emphasis on speed…. and we want things immediately! As a 24 year old I face this same struggle and have to fight the urge to ‘buy now, pay later’. It all comes down to discipline!

9. I completely agree about the impatience. I’ve gotten better now that I’m in my 40’s but clearly I would have been on a better financial path if I’d have realized what I know now 10-20 years ago. Better late than never, though, right? 🙂

Thanks for the great guest post!

10. Very well said! I completely agree that impatience can cost us a lot over the long run, and is in fact something I struggle with from time to time (I want that big house, new car, and overall fabulous lifestyle now!). I hear the point above regarding large purchases such as going to school or buying a house. Some of these can be purchased in cash (we’re saving to buy our first house in cash right now) but even if you need to take out loans for something like school, being impatient can cause you to drag out paying off your debts. I had student loan debt when I graduated and for awhile I was living a lifestyle that I really couldn’t afford and was paying the minimums on my loans. But then I got serious and punched my \$65K debt in the face within a couple of years, saving me thousands on interest. Being patient about your lifestyle and wants can help you to get out (and stay out!) of debt.

11. My best friend and I have a saving “Your priorities are showing.” She is trying to save to travel more and I’m trying to hold her accountable. So whenever she talks about something she bought or a weekend get away, I’m always responding with “Your priorities are showing.”

12. Great post, William.

I know that I am impatient. However, as Larry wrote, I make “rational” choices about what I’m willing to go into debt for. That said, I do own more than I owe. We don’t have a mortgage on our home anymore but we do have a line of credit. Do you have any advice on recommended debt ratios? i.e. The value of what you own vs the value of what you owe?

13. Recommendation? Infinity, that’s where you divide what you own by what you owe. (And if you owe zero the answer would be infinity.) As Buzz Lightyear would say: to infinity and beyond! 🙂

Realistically, there are very few people who are able to get to infinity, In the end it’s a personal choice,. Bankers always look at worst case: what if you lost your job or your health for two years (or more)? How will you get by? We always push to get the number higher, but I don’t know that there’s a magic number where you can relax and say, “We’ve made it, let’s celebrate!”

Other, of course, than infinity…

14. Fanfreakingtastic! I have emailed this to my coworkers and a couple friends.

15. William, there’s really no point in stretching a college education out. Student loans interest and college tuition is going to rise every year anywayz you might as well get it over quickly. Plus you have to take a certain amount of course to even be considered for financial aid, and you can only take so many before they cut you off.

• That is absolutely correct. Costs for a college education have been rising between 8-10% annually, far greater than general inflation. By waiting longer, you only increase your expenses.

• And assuming that your degreed job pays more than the one you have while going to school, then there is the opportunity cost of delaying when you’ll be able to start working at the post-degree job.

• I disagree. My college guaranteed tuition for four years.

16. AWESOME article!!!!!!
while patience is still hard at times, it really does pay off.
Live Beyond Awesome!
Jen

17. Patience is a virtue, and we would all be much more financially healthy if we had any patience at all. Technology is one of the best examples of the lack of patience. Some people will toss aside almost brand new technology for the newest and the best, thereby wasting all of that money they spent on the last tech-hype.

18. Very good observation, and I agree!!!

19. Impatience starts with coveting – wanting more of something we already have: a new car, bigger house, more lavish vacation. Wanting something now adds fuel to the fire.

Great write up!

20. William, great post! (as usual)

You reminded me of something I need to start doing: I’m driving a 2001 minivan with 133,333 miles on it, and am holding onto it for two more years until the last kid is out of high school and all the carpools are over. But, I’ll be getting a new car at the same time she is starting college.

Solution: punch it in the face and start banking the expected car payments NOW rather than waiting to start in two years.

Thanks for reminding me of the smart thing to do!