A seemingly contradictory article was published in The Washington Post just as tax season started its quick descent to April 1 – “Smart Ways to Splurge With Your Tax Refund.”
I balked at the headline.
What kind of advice is that? During fragile financial times like these no one should spend a windfall – they should save it. I chalked it up to Jonnelle Marte, the writer, trying to get more clicks.
But then, curiosity got the better of me. And I started reading about delayed gratification – the ability to resist an immediate reward for a greater reward at a later point in time.
You know, the Marshmallow Test.
What the Kids Know
Walter Mischel’s iconic research at Stanford University’s Bing Nursery School found there was a high correlation between children who were able to delay eating a marshmallow or other treat, and greater success in adult life – such as higher SAT scores and lower body mass index.
Appropriately, The Marshmallow Test is often referenced in discussions about retirement planning and other savings tactics. Resisting the urge to spend every dollar you get, and instead saving some for 30 to 40 years down the road, is one of the most successful expressions of delayed gratification in the financial sphere.
In 2014, Mischel published the book The Marshmallow Test: Mastering Self-Control. The book focuses not so much on the test, but on the things the kids in the test did to make self-control easier or harder for themselves and what adults can learn from that to strengthen their iron wills.
The kids who were able to delay gratification and not eat the treat in front of them didn’t just sit there and stare at the fluffy white blob. They played with the toys in the room, used their imagination, or sang to themselves.
In other words, they used tactics to distract themselves from temptation and exercised self-control.
Mischel made another crucial point in an interview about his book in The Atlantic. Self-control or the ability to delay gratification is like a muscle. You can choose to flex it and the more you do it, the stronger it gets.
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Accordingly, Mischel says that people can also experience self-control fatigue.
He points to former President Bill Clinton and Tiger Woods as examples. These men exhibited immense self-control and focus to achieve great success in politics and on the golf course, respectively. Yet, they both made career-tarnishing decisions in moments of privacy.
Mischel argues that after exercising tight self-control for so long in one area of their life, both men experienced moments of fatigue in another area. Thus, they couldn’t judge the situation with the same high level of discernment that they had previously displayed.
These men, along with the rest of us, are human, and we all experience moments of weakness or poor judgment. If we acknowledge that, then perhaps we can work with those instances in a way that’s more conscious and less damaging – at least in the financial sphere.
In this context, Marte’s article about spending your tax refund makes more sense.
She states that if you have exhibited solid self-control over the course of the year and are in good financial health, it may be better to consciously choose to splurge on something that will really benefit and satisfy you – like a vacation, a new car, or new furniture.
This is better than being overcome by self-control fatigue and making a rash spending decision – or decisions – that could do lasting harm.
Using part of your tax refund to treat yourself could also make it easier to stick with saving habits throughout the year, says a financial planner quoted in Marte’s article.
Spending your money intentionally and with great awareness on something you really enjoy, may make it easier to resist impulse purchasing through the rest of the year.