Some people naturally have a personality that lends itself to being frugal. Others are risk takers, which might result in blowing an entire paycheck at the casino…or it might give someone the motivation to start a small business. And some people are born into wealth—but may or may not manage to hold on to it. What makes the difference between good financial outcomes and bad?

 

Well, according to research on the financial outcomes of adopted Swedish children, it appears that it’s not where you came from, but how you were raised that truly makes a difference to your economic success. (In the study, “wealth” and “economic success” were defined by positive net worth, or assets minus debt. Our view of “wealth” is more expansive.)

It makes a lot of sense that if your parents imparted good financial lessons to you growing up, that they would carry over into your adult life. But it’s never too late to learn. When people meet with us about their financial goals, we make it a point to explain the “why” and “how” behind everything we do—but your financial advisor doesn’t create the wealth they help to manage and grow. You create the wealth and good financial decision-making is a big part of that.

Delayed Gratification

Possibly the most important factor in making the right financial decisions for yourself is your ability to delay gratification. It’s not easy to resist the temptation to buy something now on a credit card rather than saving up for it, or to stick with a disciplined financial plan that emphasizes safety and steady growth over the excitement (and potential losses) of the next hot stock or timing the markets. The good thing is that delayed gratification can be practiced and honed from a very early age—and it doesn’t have to feel like a sacrifice if you know the eventual reward is greater than the short-term reward.

There’s a famous Stanford experiment that showed that children who were able to delay gratification—by forgoing eating one marshmallow now as a tradeoff for eating two marshmallows later—later ended up with better SAT scores, lower body mass index, and higher educational achievement.

So the next time you get a bonus, think: are you going to eat that marshmallow immediately? Or would you rather wait and enjoy an even greater treat in the future? 

IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Halpern Financial, Inc.), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Halpern Financial, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Halpern Financial, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Halpern Financial, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.