I am just like everyone else: I like nice things. I prefer to buy high quality items that will last a long time and provide me with a lot of use and value. But, I also realize that I can’t have everything that I want.
They say patience is a virtue, and I agree. Waiting to purchase things that I coveted has been a financial blessing in my life. Delayed gratification has kept me out of debt and allowed me to amass a respectable net worth by saving more money – while still enjoying my life in the process. Let me give one example out of many. I will use cars, but you can substitute electronics, clothes, frequent nights on the town, etc.
Delayed Gratification is the Key to Building Wealth
I enlisted in the USAF at age 19. Most people I came in with were roughly my age. For most, including myself, this was their first “real” job with a full-time paycheck. I witnessed a lot of friends go out and buy new cars, stereo systems, rims, TVs, video game systems, DVDs, CDs, etc. Many people blew through their paycheck within the week and had to wait until their next paycheck to afford a $6 haircut. I couldn’t, and didn’t, want to live like that.
Fast forward to my first duty station – RAF Lakenheath, England. I bought a $700 Rover Metro. It was a tiny car with a 1.1 liter engine and was about the size of a Mini Cooper. I affectionately named it “the Little Red Demon.” It got 40 mpg, and was incredibly fun to drive. When I left, I sold it for $600.
My next vehicle was an upgrade. I moved to the US and bought a 4 year old pickup. It was a basic model Toyota Tacoma, no frills, but dependable and economical. I paid half down and paid my 3 year loan off in 15 months. On paper, I could have afforded a new car, but I didn’t want to be saddled with large payments. Instead, I used the money to fully fund my Roth IRA, invest in the Thrift Savings Plan, and have a good time traveling and living life.
Time to upgrade my ride
After 3 years of owning my truck, it was time to upgrade. It had a standard transmission and I was about to have 2 knee surgeries. I lived alone and a vehicle was necessary where I lived as there was no reliable public transportation to get me to and from work. I had the option of dealing with a stiff clutch and a vehicle I didn’t want, or trading it in and buying something I wanted. Time to go shopping! And shop I did! I did my research and felt prepared to buy a new car. Doing your research can help you get the best price on a new car.
I fell in love with a late model BMW 325. If you have never driven one of these cars, they are incredibly fun and responsive. I was inches away from buying it. The BMW 325 is sleek, fun to drive, comes loaded with premium sound and leather everything… Wow! But they are also very expensive to purchase and maintain.
In the end I bought a new car, which was the right choice for me (I know buying used is often better, but this was right after Hurricane Katrina and there were a lot of flood damaged vehicles on the market, so used cars were not always the best choice in that specific environment).
How is buying a new car exercising delayed gratification?
Well, it cost several thousand dollars less than the BMW. I wanted the BMW, but I didn’t need it.
You see, I was in a financial position where I could afford a new car without breaking my bank. My trade-in was about ⅓ the cost of my new car, and my down payment was about 1/3. That left a small monthly payment, which I got at a low rate and paid off in less than 2 years. Not having a car note is a wonderful thing!
I actually could have paid cash, but I was coming up on a career change and I valued having the extra cash in the bank in case of emergencies.
Delayed gratification is essential to good financial health
Had I bought a new car as a younger Airman, I would have been saddled with crushing debt, probably for the entire length of the loan. It would have also used up the majority of my paycheck every month – leaving me with little else to use for enjoyment and living.
Instead, I bought a junker and enjoyed myself. I traveled throughout England and Europe. I invested in my retirement accounts. I went out with friends and lived. And I have no regrets.
I would still love to have that BMW. Not just as a status symbol – that car is sweet! Smooth, powerful, sexy. But, right now, there are other things that are more important to me – investing for retirement, traveling to see family and friends, and enjoying my life. You see, the freedom of not having a car payment allows me the freedom to allocate those funds however I want. And that is liberating.
One day I may just have that BMW. And I guarantee you this… it will be well worth the delayed gratification.