Thanks for Saving More Money!

Life’s easy button?

“Gratitude is the healthiest of all human emotions. The more you express gratitude for what you have, the more likely you will have even more to express gratitude for.”
–Zig Ziglar

James Altucher has had ups and downs in his life.

The founder of StockTwits has been a millionaire before. Then he lost everything. Then he gained it back.

He’s not your prototypical success story. He’s not even your prototypical “average person” story.

After all, there aren’t that many people who have been millionaires, much less lost it all, and then made it all back.

In his book Choose Yourself! (#aff), he describes what he felt like when he had hit bottom – having lost his fortune and seriously considering whether killing himself because of his $4 million life insurance policy.

At that point, he decided that he needed to live in the present.

He calls thinking too much about the past or the future time travel. When you time travel, you either worry over things that you can no longer change – the past – or about things that may not work out the way that you expect them to – the future.

But, at his nadir, he was having trouble focusing on the present. He was having trouble doing anything except feel sorry for himself and question his worth to society.

So, he started expressing gratitude. Two of the twenty-six items in his “daily practice” involve expressing gratitude. He later advises a reader who has eight days to make rent to start the day by listing out things to be thankful for and telling friends how thankful he is to have them in his life.

Altucher advises living in a state of gratitude and not time traveling. But, does being grateful now and living in the present help you in the future?

According to Harvard’s Jennifer Lerner and her team, the answer is yes.

How Gratitude Now Makes the Future More Important

As we saw in “What Does the Future You Think?” our limbic system likes to view the present as more important than the future. Monkey Brain – what I call the limbic system, since it’s the primitive part of the brain that we share with monkeys – wants happiness, and he wants happiness now. He doesn’t care if Future You has to go without as long as he can get the man cave and the Jimmy Choo shoes now. Therefore, as far as Monkey Brain is concerned, a dollar now is worth a lot more than a dollar in the future. $0.75 now is probably worth more than $1 in the future. This willingness to take less now and to value future benefits as lower than present gains is called hyperbolic discounting.

Part of the reason that we suffer from hyperbolic discounting is because we are impatient creatures. We’re optimistic that the future will look better than the present, which means that we can’t wait for that future to occur. We are willing to spend more now to make the present look more like that envisioned future because Monkey Brain’s time horizon is VERY short. After all, back in the good old days of living in caves, we didn’t know if we’d even be alive tomorrow. Hence, “drink now, for tomorrow, we die!”

To help fight the tendency to discount the future in exchange for pleasure now, we need to reduce our impatience.

The aforementioned study’s authors hypothesized that gratitude would serve to reduce impatience, and, therefore, reduce hyperbolic discounting, meaning that we’d be more willing to save money today (or take less today) to have more in the future.

Their theory is that gratitude is an emotion based on future reciprocity. When we do someone a solid, then, as Robert Cialdini explains in his book Influence, they feel a psychic debt towards us. We expect, implicitly, that, at some point in the future, they’re going to return the favor.

Since gratitude is mostly a social feeling – we’re grateful for living on a beautiful planet, but we’re usually grateful to someone for doing something for us – it invokes current costs in anticipation of future gains. We would have never settled down as a civilized society had we not been willing to give up a little now (say, seeds, or protecting others from intruders) for a lot later (crops, food).

Thus, when we feel gratitude, Monkey Brain thinks back to those days long ago when sharing the mammoth kill meant he got a nice warm cave to sleep in, and he becomes less anxious about the future and more focused on the present.

In doing so, we appreciate the present as it is and don’t rob from our future selves to make today a little better.

The experimenters contrasted gratitude with happiness, because, hey, if you’re happy today, wouldn’t you be OK giving up some for your Future Self?

Happiness, though, is not tied to the expectation of good stuff in the future. While gratitude evoked future reciprocity, happiness now, psychologically, invokes no expectations of the future.

To prove this, the experimenters asked a group of college students to think of a situation that made them happy or grateful, or to think about yesterday (a neutral state). They then gave the participants a choice between receiving a smaller amount of money now or a larger amount of money some point into the future, between one week and six months in the future.

On average, the future payment was $85 three months into the future.

How much did each group need to receive now in order to forego that future $85?

Grateful participants required more money now to forego a future payment – the equivalent of saving 14.5% more than happy or neutral participants.

So, before you meet with me, go to that 401k plan participant meeting, or set up your budget and decide how much you want to set aside for your retirement investing, take a moment and think about ten different things that you’re grateful for.

You’ll save more. You’ll thank me later!

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Jason Hull, CFP®, was the co-founder of Broadtree Partners, a firm that acquires $1-5MM EBITDA companies. He also was the co-founder of open source search consultancy OpenSource Connections, a premier Solr and ElasticSearch firm. He and his wife FIREd (financial independence retire early) at 46 and 45, respectively. He has a BS from the United States Military Academy at West Point and a MBA from the University of Virginia Darden Graduate School of Business. You can read more about him in the About Page. If you live in Johnson County, Texas or the surrounding areas, he and his wife are cash buyers of Johnson County, Texas houses.

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