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In the late 1960’s, psychologist Walther Mischel conducted an ingenious experimenttesting the ability of children to delay gratification.  A child was left alone in a room with a marshmallow on the table, and was told if he or she could wait 15 minutes to eat it, they would get a second one as a reward. 

About two-thirds of the kids failed the experiment – but the fascinating part of the study was the follow-up research on the children years later.  The kids who didn’t eat the marshmallow had stayed in college, made more money, and had fewer drug and alcohol problems.  The kids who had been able to delay gratification were more successful in life overall.  
As I read a Wall Street Journal article this morning about yet another government spending program that makes it impossible to balance the budget, I wondered why we’re surprised we have this problem.  It’s easy to be critical of Congress and its inability to make difficult decisions necessary to keep our county within its spending limits, but many people can’t balance their own family budget – so how do we expect states with competing interests to agree?  Congress is only a representation of the people it serves. 
Why has it been so tough for my baby-boomer generation to budget?  I have a theory.  We didn’t learn to delay gratification.  We grew up in a time of prosperity, and it felt like the party would never end.  Sure, we experienced the lousy stock market of the early 70’s, but most of us were just getting started, so we were unaffected.  We also experienced raises that were tied to inflation, and our salary increases in the 80’s bought us even better lifestyles when companies like Walmart and Costco drove down prices of the everyday things we purchased.  The easy credit of the 90’s caused our home values to race up and our cost of borrowing to drop – we were on a roll.  We didn’t have to budget like our parents and grandparents; until the Great Recession began in 2007. 
Although markets have recovered from their lows, it’s evident we may be in for an extended period of time when we won’t have the wind at our back.  And we need to adjust.  Like the kids in the lab, we must exercise some self-restraint; and like Congress, we have to make some tough decisions.  At the risk of sounding overly-dramatic, it’s much easier to make a change in our lifestyles today than it is to choose between buying food or paying the mortgage tomorrow.
I’ve had this discussion with clients and prospective clients over the past several years, and I’ve been told by some that they intend to enjoy life now, because it won’t matter when they’re old.  I think this is a battle we’re waging between our present and future selves.  It’s easy to delude ourselves today that it will be easier to get by with less in the future.  One of my favorite quotes on this subject was made in a presentation by Shlomo Benartzi, an economist who studies financial behavior:  “Self-control is not a problem in the future.  It’s only a problem now, when the chocolate is next to us.”
Marshmallow, anyone?
Jeannette A. Jones, CPA, CFP®