$500 Today or a Penny Today…?

$500 Today or a Penny Today…?

Often when I do Financial Education workshops, I will start off with an ice breaker to get the attendees engaged and thinking about the subject matter I am about to present. I enjoy using a particular ice breaker that has to do with choices. I put a slide from a PowerPoint presentation on the screen and ask this question: Which would you choose? I will give you $500 right now or I will give you a penny today and double it every day for 21 days. For many, the choice seems like a no brainer. The $500 today, of course! For those who are familiar with the choices, they smile with pride and say, “The penny! The penny! ” Then there is the group that is not sure and do not want to be wrong, so they just sit and wait to see what is going to happen. After getting a majority of the participants to making a choice, I proceed to go through the slides and show them how much a penny doubled every day will total after 21 days. At day 14 the total is $81.92 and those who chose the $500 are feeling pretty good about their choice, while some of those who chose the penny may be having second thoughts. At day 17 the total is $655.36. Those who chose the $500 begin to realize that they may have made a mistake, while all of those who chose the penny are feeling pretty good about their choice. At day 21 the total is $10,485.76! Some of those who chose the $500 want to change their choice, while those who chose the penny are really feeling good about their choice.

The point I like to make about this exercise is that it really does not matter who chose the $500 or who chose the penny. The point is that we all make choices about our money. We make choices about spending, saving, and borrowing. We make choices about what we want and what we need. And often the choices about our needs and wants determine the choices we make about spending, saving, and borrowing. Those who choose the $500 today represent those individuals who want instant gratification. They want things today. They do not want to wait. In many cases, they place their wants ahead of their needs and are more likely to spend than to save. They will also borrow, often by using their credit cards, to get what they want now. Those who choose the penny today represent those individuals who are willing to wait. They are satisfied with delayed gratification. They believe that if they spend less today and save more, they will be able to get what they want in the future. They tend to place their needs ahead of their wants in the short term. They usually end up with more than their counter parts because they have more savings and do not have as much debt in the long term.

Some of the most familiar choices we make are related to shopping, going on vacation, purchasing gifts, purchasing a car, etc. Often, you will see something you like when you are shopping and buy it whether or not you need it or can afford it. Many closets, attics, basements, spare bedrooms, garages, and storage units have been filled with items that were purchased because someone saw it and just had to have it. Usually, vacations are planned well before they are taken, while sometimes they are taken on the spur of the moment. In either case, I think it is important to make a budget for your vacation(s) and set money aside each paycheck or each month, so you do not have to use your credit card or take out a loan to pay for your vacation. Otherwise, you will still be paying for your dream vacation long after it has become a distant memory. I think you get the picture. Many items that we want or just have to have right now can wait. I am not trying to tell you what to do with your money, but I think your money can go farther and you may be happier in the long run if you wait. Sure, others will be driving your dream car before you do. You will see pictures of your friends enjoying your dream vacation. The thrill you get from buying impulsively will be put on hold. However, those feelings are just delayed and not denied. You will be able to drive that car with a bigger down payment or no payment at all because you bought it with cash. The same goes for that vacation. I am sure you will get an even bigger thrill of enjoying your life with less debt and more of your dreams. Life is full of choices. The most important thing is to make the choice that is right for you. That means that you might have to wait, but I think it will be worth it. All the best!

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