Persistence and Patience

Applying persistence and patience to overcome instant gratification is without doubt one of the most important but least discussed secrets to financial success. But while it produces amazing results, it will not happen by accident and for many never materializes.

Time and Money

Folks who know me know I have a somewhat wry sense of humor—some might say more weird than wry! I sometimes enjoy saying things that reverse the normal expressions we hear just to notice how people react. For example, if someone says they have more time than money, I might respond, “Really. I always figure I’ve got more money than time.”

This particular line not only catches people off guard, it also makes a good point. If they respond at all, in the right context I might explain, “The way I look at it, I can always get more money but time is a limited commodity.”

Unfortunately, in our day of instant gratification there is little appreciation for persistence and patience with money. But both are required to take advantage of time in relation to money and income. And if you neglect to act in time you won’t have any more time to act in!

One of the more important aspects of productive financial planning is to understand the relationship of time to our success in growing our money. If you have ever looked at it in terms of compound interest, for example, you know that the effects of time are enormous.

The Famous Rule of 72

You have likely heard of the famous “Rule of 72.” This rule is actually a valuable tool that enables us to project interest rates and time as to their output. I use it most often to project how long it will take an investment to reach a specific goal.

To use the tool you simply divide either years or interest rates into 72 to get the other. For example, divide an interest rate of 10 into 72 and you get 7.2 years, the time it takes the money to double. Working the other way, 7.2 years divided into 72 tells you that you need 10% interest to double your money.

The following chart demonstrates how this rate of interest would affect a single $1,000 deposit over a period of time at this 10% rate.

Look at this table for a moment. Several important concepts are easily seen, concepts that need to be internalized by anyone who wants to be successful with their money.

The Magic of Compound Interest

The most important idea is the one you will often hear described as “The Magic of Compound Interest.” This simply refers to the fact that the interest added to your account in one time period becomes the basis for interest in the next.

In our table above the increased interest earned in each succeeding period is possible totally because of this factor since there is only one initial deposit. No more money is required. No more work. Just patience.

In the first 7.2 years only $1,000 is earned. But watch what happens. In the last 7.2 years the interest earned is $64,000! Wow, that really is magic. Now you see why investing pays more than working for a salary, if adequate time is allowed.

You can also see why patience and persistence are required, or in other words, delayed gratification.

• Using your money for long term goals requires delayed gratification.
• Continuing to put additional money into your investment program month after month requires persistence.
• Ignoring the short term limits and waiting for the long term results requires patience.

Consider this insight:

The magic of compound interest is only experienced through the magic of delayed gratification!

The Problem with Delayed Gratification!

If these figures are right, and they are, the big question is why more people don’t take advantage of the opportunity. The answer is also seen in the figures. At least if we interpret them in the light of our understanding of human nature.

If you look at the amount of growth after 25 years, after fully half of the time involved, the total earnings are only about $1,000 a year. After 50 years earnings are ten times as much. Revealing, isn’t it?

If there is any single factor most responsible for the financial problems of our day I believe it might be the demand for instant gratification.

This factor can be seen in many areas of life.

• We go to the fast food place, order, take three steps to the pick up and say, “What’s taking so long.”
• A carpet store in our area advertises that you can order today and get your carpet installed tomorrow.
• And unless their drivers have gotten too many tickets or scared too many other motorists, Fast Pizza Delivery in San Jose, California, promises two large pizzas and four orders of buffalo wings in fifteen minutes!

Unfortunately our demand for instant fulfillment has carried over into the financial world.

• Real estate brokers don’t advertise that they will get you the best price for your house, they focus on how fast they will sell it.
• Credit card companies don’t advertise that they will offer you the lowest rates, they emphasize how fast you can get the card (call now for instant approval).
• And of course the car dealers promise that you can drive in your old clunker and drive out in a brand new car today.

A Better Way of Thinking

If we want to be successful with our money we must learn to think in a totally different way. The law of patience and persistence puts it this way:

“Success with money requires persistence and patience as much as it does knowledge and skill.”

Over and over I emphasize how important it is to acquire knowledge and skills about money if we want to achieve success because I know for a fact that people have ideas in their minds that are completely opposite to the truth. Those false ideas keep most people in financial trouble all the time.

So it is important to learn the truth about money. But I have also learned that without persistence and patience in the application of correct ideas, nothing will come from even the most powerful truths.

No doubt, for example, most people know they need savings for many reasons including reserves for emergencies, education, purchasing major appliances and vehicles, and especially for retirement. But only a few save extensively.

One reason for this can be seen in the chart I showed you above. At the beginning, investments of any kind won’t seem to be very productive. It is only when profits begin to compound that the big advantgages can be seen, and that takes time.

Furthermore, this principle applies to more than just investment income. It certainly applies to business ventures.

Every once in a while I hear some advisor suggesting that if your new business doesn’t turn a profit within a year or two you better be smart enough to close up shop. And it’s true, a good business plan based on sound information should allow you to project profit sometime.

But tell me, how long did it take Amazon to turn a profit? The answer is almost ten years. But the wait was worth it with $73 million in profits that tenth year.

Planning, Persistence and Patience

People who study success of all kinds conclude that the most common factor of success is how far people plan into the future. I know that it was certainly a long look for me when I got out of high school, especially having no money, to begin a long educational journey just to prepare for what I wanted to do in life.

However, I know I would not be where I am today without a long term commitment to learning. By the time I earned my doctorate I had spent a lot of years in school. But I can say, truthfully, I still consider every minute and every dollar invested in it to have been worthwhile.

What are your financial goals? Do you have one year goals? How about five year goals? Do you have any ten year goals? And do you have written plans for achieving them? Patient and persistent thinking produce them.

Do you want to start your own business? Do you want to pay off your credit cards? Do you want to have enough money invested to be able to retire at 65, or 55, or maybe just sometime? Do you want to eliminate payments on that mortgage? Where are your plans to do so?

Here is the good news. Persistence and patience are not mysterious qualities that you either have or don’t have from birth. They are a matter of choice, a choice anyone can make.

Commit to Persistence and Patience

No matter what your goals are, if they are worthwhile they will require persistence and patience. You must begin. And you must consistently work at rejecting instant gratification in favor of delayed gratification in order to achieve each goal. In the end it pays, and it pays big time.