Denali Northern Expenditure

Tag: temporal discounting

It's Not Your Fault You Want to Spend Money

It’s Not Your Fault You Want to Spend Money

FLASHBACK: Thousands of years ago. You live in a cave, kill your own food, carve your own pictures into cave walls, and communicate very effectively through a series of grunts (clearly, I have no actual sense of what this period of time was like).

We know our bodies evolve based on our circumstances. THIS IS STILL TRUE. Example: Wisdom teeth. Remember back in the cave when we had to tear flesh apart with our teeth. No forks. No knives. Teeth. “Oh” you say, “THAT’S why we have wisdom teeth!” Now, wisdom teeth are a hassle. They crowd our smaller jawlines, mess up the rest of teeth, can get impacted, and cost money to get removed. Well, guess what? Humanity has gotten the memo! I, personally, only had 2 wisdom teeth, and my husband only has 1 that’s never grown in (I know. We’re advanced specimens). Some predict wisdom teeth will disappear altogether within just a few generations!

What does this have to do with spending money?

Oh yeah… I was talking about money.

Gratitude: An Antidote for Temporal Discounting?


Everybody is impatient to some degree. When it comes to money, we want money now. We want to spend money now. This economic impatience is called temporal discounting. In short, temporal discounting means that we value $50 today over $50 tomorrow and it’s one of the main reasons most people don’t have enough money to retire. The ability to overcome temporal discounting would be considered an economic super power! You would be the world’s greatest saver! Unfortunately, there isn’t a way to overcome temporal discounting entirely, but there are ways to lessen its impacts.

The Two Things Keeping You From Retirement

The biggest financial finish line in the majority of people’s lives is retirement. Researchers have poured years into studying how to get people to actually take the steps to prepare for retirement because not enough people are doing so. The definition of retirement is to leave one’s job and cease working. Quitting work is the easy part of retirement. The hard part is being financially prepared to no longer have paychecks coming. Everyone is looking for a magic bullet to retirement—the as-seen-on-TV pill for becoming rich. People want to win the lottery or inherit large amounts of unexpected money because otherwise, they just don’t know how they will ever have enough money to retire.

Research Highlight: Temporal Discounting

We’re going to throw around some terms today that will impress your friends at dinner parties. Get out your notepad. Today’s topic is intertemporal choice and temporal discounting. Intertemporal Choice is a term used when a choice involves making a decision at a certain time that will impact the outcomes at a different time. For example, remember the Marshmallow Study? It is an intertemporal choice to choose between taking one marshmallow now or waiting for the second marshmallow. Temporal Discounting simply means that we value the second marshmallow less than we value the one sitting in front of us because the one sitting on the table is here NOW and the other one is LATER. If I told you I would give you a dollar now or you could wait a week and get the same dollar, why would you wait a week? The dollar now is worth more. You could spend it on your way home (don’t. even though the dollar is fake). In one of the most obvious financial examples, it’s hard for people to save for retirement because they value the money now more than the money later.

Temporal discounting is a highly studied topic because it’s important for people to understand how much an individual will discount that future dollar (or marshmallow, or whatever) for the one today. (Would you trade a dollar today for FIVE dollars next week?) It’s also important to understand what factors into that discounting. (Do you trust me? Have you been raised on a family saying of “Take the money and run?”)  This is one of my favorite topics (I reserve the right to share more research in this field at a later date… but because of temporal discounting, THIS post NOW is definitely worth more… I know. I’m hilarious.)

So what does the research say, and how can we learn from it?

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