A study by Meier & Sprenger in 2008 found that impatient people are most likely to default on debt and have higher levels of debt on revolving accounts (credit cards) than patient people.
Talk to any stock broker and they’ll tell you that impatience (as well as greed) has ruined many great men.
The impatience to get rich quick causes many investors to forego research and long term investment strategies, leading them to financial ruin.
How does impatience impact financial behavior?
1. Decreased savings
When you’re impatient it’s difficult for you to save and wait for the things you want, so you spend what you have to get satisfaction in the here and now.
2. Risky investments
Impatience by its very nature makes you take on more risk for higher rewards and rush things.
3. Get rich quick schemes and gambling
This is very similar to a risky investment because in your quest to make money fast you fall victim to financial scams.
4. Stealing and other unethical deeds
You cut corners and try to get money in any way because the legal way takes too long and you just don’t think you have time to wait.
5. Under-price your services
As the research shows, impatient people are quick to settle for lower wages. Impatient entrepreneurs will undercharge their services and products in order to get money. In their haste they compromise on quality and are forced to under-price products and services.
6. Increased credit card debt
You take on more credit card debt, instead of saving, to acquire the things that you want. Your concept of time as a limited resource pressures you to spend NOW.
How To Be Patient
We get impatient about money when we buy into the belief that we need to have something now or that we need to make money now.
We have high expectations and expect them to be fulfilled right now, which leads to negative financial behavior.
1. Distract yourself
Walter Mischel conducted a marshmallow study with 4 to 6 year olds where he left them in a room with their favourite sweet.
He gave them 2 options: they could eat the sweet now or they could eat the sweet after a few minutes when he got back into the room, in which case they would get an extra sweet.
The kids that were able to wait before they ate the sweet were the ones that were able to distract themselves by singing, playing with their hair and closing their eyes.
Interestingly, when Mischel followed up with these kids in 1980 he found that the ones that had been able to delay gratification had higher SAT scores.
The best way to distract yourself is to focus on your breathing.
Find a place where you can sit, clear your head and focus all your attention on your breath. This will bring you back to your centre and calm your mind.
Don’t make a financial decision, until you calm down.
3. Understand what triggers your need to spend and avoid it
Our feelings are often triggered by something. Pay attention to your spending triggers and make an effort to avoid them. I avoid the travel channel because they trigger my travel bug, which leads me to spend money I don’t have.
4. Create a fun account
Living on a budget can be tiring and can lead to debt fatigue or decision making fatigue, which makes it easier for us to act on impulse.
Having a fun account/ travel account and treating myself, makes budgeting easy. Life stops being about debt and becomes about having fun as I work towards my financial goals.
Impatience stems from the underlying belief that things need to happen in this instant for us to be happy.
It’s this underlying belief that gets many people into debt.
Mastering your impatience helps you master your finances.
How does impatience impact your finances?
Let me know in the finance section below.