When I was in Middle School, my twin brother bought a stereo. Not a portable Boombox, but an entire component system on shelves that took up a large corner of his bedroom.
I remember, to this day, being outside when he arrived home with his purchase. I was shocked.
I wasn’t surprised necessarily that he had bought such an impressive stereo system. I was shocked he had enough money to buy it.
We received the same allowance from mom and dad. We worked the same amount of odd jobs (mowing lawns, etc.). And yet, I had nowhere near the amount of money required for such a purchase.
Looking back, it might have been a foolish question, but I remember asking him directly, “How in the world did you have enough money to buy that?” I must have been expecting to hear that he had picked up a second job without me noticing.
But instead, he simply said, “I’ve been saving up my money for quite awhile to buy this stereo.”
In my head, I quickly recounted the amount of money I had spent on baseball cards and candy over the previous months and figured the amount in my head. The Math added up.
Had I not spent money on candy could I have bought something bigger and cooler? Is it really that simple? Just decide to spend less and save more?
Maybe it is that easy, maybe it isn’t.
Enter “present bias.”
Present bias is the tendency for humans to settle for a smaller reward in the present rather than wait for a larger reward in the future, in a trade-off situation. It describes the trend of overvaluing immediate rewards, while putting less worth in long-term consequences.
For example, would you prefer $100 today or $110 in one week?
The wise decision is to wait a week. But a large percentage of us tend to choose the smaller amount today. That tendency is called “present bias.”
Brain scans have been done to figure out why so many of us choose the smaller reward in the present moment, rather than waiting for the bigger pay-off. And the science tells us one of the reasons is because the idea of a “present award” activates the reward center of our brain to make the decision rather than the areas of our brain that might be better at decision-making.
Of course, the example of present bias above doesn’t have too many real-world implications. Very rarely will a stranger approach us on the street offering $100 today or $110 tomorrow.
But the implications of present bias can be seen in countless situations:
- Would I rather hit snooze to sleep-in this morning… or get up and exercise?
- Would I rather spend money on a concert tonight… or pay down extra on my credit card debt next month?
- Would I rather stay up late and watch another episode of this Netflix series… or feel rested in the morning?
- Would I rather stay home this afternoon… or make an appointment for my health screening?
- Would I rather enjoy this ice cream right now… or keep the pounds off tomorrow?
- Would I rather do the work today… or put it off until tomorrow?
- Would I rather accept a new job today with a higher paycheck… or keep one that allows me longer-term work/life balance?
In each case we can see how the promise of an immediate reward overtakes our thinking and moves us away from longer-term, wiser decisions.
These effects can be seen in our finances, our health, our habits, our homes, our families, and our opportunities in life.
We would be wise to not allow present bias to keep us from better, healthier, more life-fulfilling decisions. But how?
How do we overcome present bias?
Here are seven ideas:
1. Become aware of it.
Some people are more susceptible to present bias than others. If you are, become aware of the pattern in society and yourself.
At the very least, starting today, you have a word for it and know that you are not alone.
2. Work to notice when it is happening to you.
It is one thing to understand the principle. It is something entirely different to recognize when it is affecting your decisions.
To begin noticing it more, make it a specific point in your life over the course of a few days (including a weekend) to think a lot about the principles of present bias and look for as many examples in your life as you possibly can. You’ll likely see the principle at play far more than ever realized.
3. Access the long-range decision-making portion of your brain by considering your long-term goals.
One of the first steps I encourage people to take in their decluttering journey during the Uncluttered Course is to write out why they want to own less.
“I desire to own less so that I can ________.” And I ask them to tape that sentence to their mirror or refrigerator—somewhere they will see it often.
This serves to keep us focused on our longer-range goals and keeps us motivated in the present to make wise choices about our time, money, and even decluttering efforts.
The same principle can be used to overcome present bias. The clearer we get on our long-range goals and priorities, the quicker we can access them when they come up against immediate gratification.
4. Focus on the immediate satisfaction of delayed gratification.
One strategy discovered by researchers and published in the Harvard Business Review focuses on our potential to better accomplish long-term goals when we consider the immediate gratification of them.
For example, people who say they have fun while exercising are more likely to exercise. Those who enjoy their field of academics, study more. Those who enjoy the taste of healthy food, eat healthier.
This may seem like common sense, but it can have a profound impact on us. If we focus on the positives of wise decisions and the immediate gratification that we get from the behavior, we can move that action into our present bias.
Choose exercises you enjoy. Think of how good it feels to go to bed each night. Consider the positive aspect of putting in the work today. Notice the specific enjoyment of seeing your savings account grow.
Focus on the immediate enjoyment that you can find in even delayed gratification.
5. See if you can remove the decision altogether.
In a fascinating study, researchers discovered how automatic enrollment in a retirement program changed people’s behavior. When employees were asked if they wanted to opt-in to a 401k retirement policy, only 40% took the opportunity (present bias). But when employees were automatically enrolled in the program, only 10% opted-out, leaving 90% participation.
Lesson learned? When the opportunity for present bias is removed, we tend to make wiser decisions. See if you can remove the opportunity for present bias in your life. For example: automatically deduct for savings/investment, use an app to limit your phone use after 10pm, keep healthier food in your home.
6. Place a waiting period on tempting decisions.
Do you often find yourself overspending your budget or buying things you don’t need? Maybe sales or discounts or weekends become triggers to overshop?
Create a 48-hour waiting period on your shopping decisions (especially in areas you are prone to make bad decisions). This waiting period will counter the immediate reward center of your brain dictating your present bias.
7. Work to imagine how Future You would decide.
Present bias is strong and ingrained or it wouldn’t be an issue.
The steps above can help us to overcome it and lead to wiser decisions. No doubt you’ll find some strategies more helpful than others.
But one closing strategy is to picture how Future You would decide the decision in front of you.
- Would future you, tired in the morning, choose to binge-watch another episode?
- Would future you, struggling to pay the credit card bill, get take-out food again?
- Would future you have saved more for retirement?
- Would future you have exercised more, eaten healthier, or spent more time in solitude?
If the answer is yes, do him or her a favor today and choose wisely.
Jessalynn Jones says
I really enjoyed this article Joshua! I am glad to have a name for this tendency to choose the more immediately gratifying choice. I think ahead about most things but I definitely have present bias about some things that I would like to be better about. I’ve noticed tho that the more you choose the big picture the better your life is! Thanks for helping us do that!
Carol says
Yes, I agree this was a brilliant article. You are such a terrific author, with such clarifying writing. I appreciate the effort you put into your work. This was a real paradigm shift for me. Another way of looking at delayed gratification that had never occurred to me. Thank you so much.
Kathie says
Once again, another brilliant article. This has been my philosophy throughout my life but for some unknown reason I started to lose my way.
Thankyou for reigniting my light.
Cheers from Kathie
P says
Excellent and compelling post. Didn’t know your twin story – must be a truly fascinating experience. But to digress, your topic which includes “present” makes me think about the upcoming gift-giving season and I eagerly anticipate your holiday gift-giving advice. Thank you.
Samira says
Yes , well said. My mum comes and we have told her that her fruit cake for this occasion are best . We lived in India and since we came back after my father retired, she took care of everything at home even daily neals 3x a day. Some foods were prepared fir the elderly older who needed this because they lived far away and no partner. My mum likes to feel appreciated and does many other things for others best . Handmade and home cooking. That’s her giving we look forward everyone .
Angela says
I don’t think you’ve ever told us you have a twin brother Joshua.
Interesting article.
It reminds me of my kindly wise Dad, he told me when I started work in 1970, ‘spend a little, safe a little Ang’. I knew deep down he was right. However I didn’t take any notice.
Fast forward to 1980, I had been married a couple of years and we were expecting our first baby. I was a completely different person, frugal, partly through necessity but also because I enjoyed it.
Do I regret my earlier years, no, if I hadn’t been so carefree I might not have learnt the other way.
KC says
It was interesting to read this as I’ve been thinking a lot about delayed gratification lately. Not so much in regard to finances, but in regard to time.
Since my husband is now retired (6 months earlier than planned due to developing lung cancer), and I still have 4 more years before I can retire with full benefits, the financial reward of delayed gratification is pretty clear. Because he saved in a 401K, we had money to pay off our credit card debt when he retired. Eliminating that debt has been a huge relief, since that has allowed us to live on our decreased income. (Of course, had we not racked up the debt in the first place, we would have been even better off.) Since his retirement income is significantly less than when he working, we depend on my income to pay the mortgage and the car payment. And it’s important that I keep working and earn enough to maximize my retirement benefits, since at some point I will only have my own benefits to live on. I’ve had to spend a lot of time recently figuring out how I will make things work financially once he is gone, and planning for that.
But while delaying gratification makes sense financially, it’s a double-edged sword. One thing we realized with his cancer diagnosis is that we may not have much time, certainly not as much as we had expected. The dream of growing old together once I retire has faded a bit. Time together to enjoy life has become significantly more important now. Delaying that until I’m able to retire no longer seems like a viable option.
Our hope is to be able to take a couple of trips that he’s always wanted to do (once he’s feeling well enough), which will cost money (and reduce income because I would need to take time off), but will be well worth it for the memories and the time we’ll get to spend together that just for us. (Yes, there are other things we can do that are free or don’t require time off work, but sometimes it’s nice to do things on your bucket list as well.) I know so many people that delayed retirement, or who retired only to pass away shortly after so they never got to enjoy that time they’d been waiting for so long.
I think finding balance is the key. (Wish I’d learned that a bit earlier.) Delayed gratification when it comes to buying “stuff” definitely can have its rewards in the future, and we can be happy with less “stuff.” I’m very grateful that we saved for retirement (though again, had we done a better job of delaying gratification, we’d have more). But there’s also some benefit of enjoying life in the time that we have, because there are no guarantees that we’ll be able to do it “later.”
Cindi says
I have the opposite, an innate future bias. I spent my first 40 years that way, spending too little and saving too much. Now I’ve spent the last 18 years learning to be more and spend more in the present instead of saving for later.
I feel that you should re-work your article to make it clear it is a balance. Some people need exactly your advice but others need the opposite.
CJ says
I really find this post interesting and your statement sounds exactly what I have in mind. Like I have been watching the news on TV more often than usual and saying to myself ” I will reduce and watch less the news so that I can devote myself on my hobbies, yard work, sewing, or just reading….” It has been showing that this worked with my kids, only the delay can be frustrating for them.
Kellie says
WOW! This article was so needed for me today, as I push away from Present Bias. Everything in this article helped me to really think about decisions make instantly, then think about it later and wished I hadn’t spent the money, energy or time on it. Thank you for helping me on my Minimalist Journey and to make wiser decisions
Dalene DeGraaf says
Perfect timing thank you. Recently I have slid into present bias habits in so many areas of my life. Everything was feeling sloppy. Today I had already thought I need to return to healthier habits of devotions, nutrition, movement, sleep, home, writing and being present. This article has excellent strategies for bringing the rewards of healthier habits to the forefront for follow-thru.
Bette says
One of the best real world examples is social security. Would I rather take a lesser amount of money starting at 62, or wait until my full retirement age (~67) for a larger amount? This example has huge implications for us and our families, yet it seems that present bias (as well as a lack of faith in the future) is causing people to miss the long-term financial picture.