All Economics Psychology Spirituality

Happy Money – Pay now, Consume later

Imagine planning a vacation for months and the time finally coming to fly away. Are you thinking about the price of the plane ticket? When you purchased the tickets, you weighed heavily on the price and possibly felt a little guilty for spending a large amount. But when it’s time to board the plane, your purchase is water-under-the-bridge and you’re no longer feeling guilty and simply excited to participate in the journey ahead.

On your return trip, Uber is not available and so you have to take a taxi to the airport. You were told to pay around $20 but as your commute progresses you watch the taxi meter pass that mark. The driver says that the airport is not far away but, in order to help you make your flight, he recommends a different route with an additional bridge fee. You accept and continue watching the meter climb over $40. Anger swells up as you consider how you could have avoided spending an extra $20, and you cannot wait to get out of this city.

Consumption is most pleasurable without the payment experience. While free is not always an option, even temporally separating payment from consumption enhances purchase enjoyment. Businesses recognize this psychological phenomenon, which has driven a boom of credit cards that enable people to consumer sooner and pay later.

Happy Money reasons that we can harness this knowledge to buy more happiness while spending less money. By going from “consume now and pay later” to “pay now and consume later”, we can reap the pleasures of anticipation without the buzz kill of reality and the struggle of paying debts later.

Psychology of Fantasizing

In modern life, we often are fortunate enough to be free from want of essentials. This reptiles that we evolved from, however, could not afford to pass up opportunities and miss a meal. Those that acted on impulse lived long enough to pass genes on to their progeny. Likewise, today, when something nice is available, we want it. Relative to now, anything promised in the future has an added chance of uncertainty.

While people understand that the enjoyment derived from purchases declines with time, we often do not recognize that delay also has benefits. In a study, participants were either given a chocolate and allowed to eat it immediately or were required to wait thirty minutes. The group that had to wait reported visualizing eating it and, when their wait was over, enjoyed the chocolate much more. However, the participants in this study did not think they enjoyed the chocolate because of the delay and – until eating it – thought that the delay would make them enjoy the candy less than if they ate it immediately.

Likewise, planning a trip at least a month in advance reduces stress and increases the value of vacations. Instead of the instantaneous pleasure of eating a candy or taking a trip right away, we can prolong the pleasure with delay. This is possible due to the powerful placebo effect, where our bodies and minds adapt to our beliefs. When visualizing a chocolate morsel, it’s easy to take a whiff of it as we press it against our lips. The crunchy texture as we bite and the semi-sweet taste as it hits our tongue. Just reading this probably made you produce saliva to help in eating it!

As it doesn’t happen immediately, however, there is uncertainty about what the experience will be.  Uncertainty itself is neither sweet nor sour; rather, it intensifies the flavor that’s already there. Considering scenarios not only keeps us guessing but keeps our attention focused on it. Anticipating the future, we smooth out the rough edges of uncertainty by filling in details with expectations – positive or negative.

When the present catches up with us, we often frame our reality according to the anticipated, prior expectations we primed ourselves with. The power of primed framing has been documented over and over. In one study. People led to believe that a set of cartoons would be funny would laugh more than a control group. In another, people primed to believe a politician would perform well in a debate viewed his performance more positively than a group of people told he was under the weather. Having developed contextualized expectations, our subconscious picks up more readily on cues that confirm them.

We fill in the blanks with fantasies, so future positive events – such as trips – are viewed in more positive light, just like future negative events – trips to the dentist – are viewed as the end of the world. The ability to generate pleasant thoughts about the future is a hallmark of psychological health. What separates the suicidal from the rest of us is not an abundance of negative thoughts about the future, but rather an absence of positive ones. When healthy people find themselves in a funk, they tend to generate rosy visions of the future as a means of escaping their current malaise. Anticipating good things produces a distinct pattern of neural activation in an ancient part of the brain.

Image result for planning a trip

As we eat our chocolate or return from our trip, our excitement can often fade and our enthusiasm wither away.  Researchers have suggested that we experience a ‘wrinkle in time,’ such that events that lie in the future provoke more emotion than identical events in the past. In a study of more than one thousand people in the Netherlands, vacationers exhibited a bigger happiness boost in the weeks before their trip, rather than in the weeks afterward. And people generate even more emotional images of Christmas and New Year’s when they imagine these vents in November than when they look back in January on their actual experiences.

But I want it now!

Gratification delay takes practice to develop and often we simply need something right away. When used responsibly, credit cards are a valuable financial instrument that allows us to “smooth” consumption. We borrow from the future during lean times (or before we get paid) to maintain a constant standard of living.

However, credit cards can damage our financial situation as they anesthetize the psychological pain of paying. By separating payment and consumption, it’s easier to swipe a card than to physically hand over cash which has been well documented.

When MBA students bid on a pair of tickets to a sold out sporting event the next day, those who had to pay with cash averaged $28 per ticket while those using credit cards paid an average of $60. Other researchers found that spending differences between tightwads (who chronically find spending painful) and spendthrifts (who don’t find spending painful enough) were smaller when people were required to use credit to make purchases than when people were required to use cash. Finally, PayPal has found that  “If a consumer uses PayPal Credit, they spend twice as much with PayPal as a consumer who doesn’t use credit with us.”

Because credit cards minimize the pain of paying at the time of purchase, they promote a kind of detachment that makes even savvy shoppers more amenable to parting ways with money. People – even tightwads – are less likely to overspend when purchasing up front.

Although the relationship between income and happiness is weak, there is a strong relationship between happiness and difficulty of paying bills.  Households with more debt exhibit lower happiness and more marital conflict. Paying later may increase the pleasure of consuming now, but the depressing effect of dread can outweigh the buoying effect of pleasure. In other words, what we owe is a bigger predictor of our happiness than what we make.


Consciously reversing our “consume now and pay later” approach can help improve our lives by training us to delay gratification. Vacations and other festivities are typically already prepaid so you can enjoy your life versus always looking at the price tag throughout your day-to-day routine. There are examples where prepaying for subscription services can save money at a faster rate than investing. Attempt to negotiate similar deals for daycare, babysitting, haircuts, and pet boarding, but make sure you trust the providers and keep track of the commitments.

Moreover, we can train ourselves to envision a fantastic future with real benefits through framing exercises. Warmth visualizations can help improve our moods immediately. Likewise, visualizing an anticipated experience lifts our spirit now and even after the experience itself!

The French use the verb se réjouir to capture the experience of deriving pleasure in the present from anticipating the future. The se réjouir period provides a source of pleasure that comes free with purchase, supplementing the joy of actual consumption. Creating a se réjouir period improves experiences even when expectations are not met. People asked to spend five minutes thinking how much fun a video game had more fun when they played it. The less people knew about the game beforehand, the more positive expectations they made and the more they enjoyed the game.

This approach is also helpful for developing a brighter world view. In a study, adults spent several minutes every evening for two weeks envisioning several positive events that might happen the next day, from receiving a text message by a former flame to eating at a cute café. After two weeks of fantasizing, these mental time travelers exhibited a significant increase in their overall happiness. This exercise in framing our reality is a direct results of the benefits of delaying gratification and investing in future happiness.

What do you think?


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