5 Things The Marshmallow Test Can Teach You About Money Management

Tina is an intellectually-gifted bartender who struggles to pay her bills. Tina serves martinis to Susan. Susan is no more intelligent than Tina, but Susan is a millionaire. If not intelligence, then what explains the difference between Susan’s wealth and Tina’s financial lack? And what do sticky, gooey marshmallows have to do with it?

In the 1960s, Stanford University psychology researcher Walter Mischel conducted a longitudinal study. Mischel placed marshmallows in front of hungry four-year-old children. He told them they could have one marshmallow now, or if they could wait several minutes, they could have two. Some children quickly grabbed the marshmallow and ate it. Others waited.

Mischel followed the group and found that 14 years later, the children who eagerly devoured the first marshmallow weren’t faring as well as the children who had waited for two marshmallows. Years later, the “grabbers” suffered low self-esteem. Teachers and parents viewed these kids as stubborn, prone to envy and easily frustrated. The “wait-for-two-fers” possessed better coping skills; were more socially competent, optimistic, self-assertive, dependable and trustworthy; and scored about 210 points higher on their SATs.

Perhaps the key difference between financial lack and wealth is not merely hard work or superior intelligence, but the ability to delay gratification.

What can the Marshmallow Test teach you about personal finance?

1. Avoid looking at marshmallows when you’re hungry

During the Marshmallow Test, some successful kids reportedly covered their eyes so they couldn’t see the tempting treat. My take away tip: Avoid temptation– stay away from the mall when you’re bored.

2. Save a marshmallow today and you’ll eat well tomorrow

The children who waited for the second marshmallow were rewarded with a 100% return on their first marshmallow. My take away tip: Unleash the power of compounding and you’ll be wealthy when you retire.

3. Drooling over s’mores? Wipe your chin and wait for the hot goo to cool– because you don’t want to burn your mouth!

One child reportedly licked the table around the marshmallow while waiting for the experimenter to return. My take away tip: Imagine having what you want, but wait until the time is right to consume. If you shop, wait until you have cash in hand to buy– don’t get burned by finance charges and credit card debt!

4. Stick your marshmallow into the fire, keep your eye on it and remove when perfectly browned– before it bursts into flames.

Some successful children watched their marshmallow to prevent others from snatching it, waited patiently until the researcher returned with the expected second marshmallow, then enjoyed their reward– without begging greedily for more. My take away tip: Invest in the market, monitor your investment and sell your shares when they reach your target price– before the bubble pops.

5. Give your children mini-marshmallows and teach them how to make rice crispy bars.

Some kids handled the wait by turning their back to the marshmallow, singing songs or talking to themselves. My take away tip: With practice, kids can learn how to delay gratification. Provide opportunities for your child to develop strategies. Give your children an allowance and teach them money management skills.

How To Revolutionize Your Spending Habits

For some, buying with credit is akin to paying with funny-money. You want something, you pull out a plastic card and shazam, you own it. At least that’s what you think… But money, whether earned yesterday or tomorrow, is something we trade our life energy for.

Do you want financial freedom? Then it’s necessary to keep your credit cards (and cash) out of merchant’s hands. Today, I’m sharing a trick that can completely revolutionize your spending habits by changing the way you see the cost of the goodies that merchants want to sell to you.

Here’s the trick: Translate the number of dollars you see printed on a price tag into the number of hours the purchase will require you to work for it. By doing so, you’ll make well-informed decisions regarding what you’re willing to pay for with your irreplaceable life energy.

Do you know how much your net pay is per hour — after all work-related expenses are subtracted? Here’s a cool tool you can use to determine your bottom line: Time Value Calculator.

One of my coaching clients (Sue) earns $60,000 annually. She’s thinking about buying a new car. She’s considering taking on a $400 monthly car payment. Should she do it?

It’s not my place to answer that question for her. But I CAN help her come to her own conclusion by turning dollars into the time she’ll need to work to pay for it. Using the Time Value Calculator, we find that after taxes, commuting, daycare and other work-related expenses are subtracted, Sue’s net pay per hour is $16.07.

Now we take the $400 monthly car payment she’s considering and divide it by $16.07 to find that buying a new car would cost her almost 25 hours of time working EACH MONTH for the next five years.

Translating dollars into time made it easy for Sue to come to her own conclusion. She decided to have her current car professionally cleaned and detailed instead.

I suggested that she write her true hourly wage on a piece of paper and affix it to her credit card and checkbook. Before making any purchase, she would be reminded to divide the sales price by her true hourly wage. Is the item or service worth the hours of work required to pay for it? If so, buy it. If not, walk away.

Let’s look at some other time-price tag examples:

Apple iPod: $250 divided by $16.07 = 16 working hours.
Monthly supply of cigarettes and chewing gum: $200 divided by $16.07 = 12 working hours every month… until you quit!
House payment (PITI and maintenance) = $1600 divided by $16.07 = 100 working hours every month for 30 years.

What’s YOUR number?

Do it – convert your dollars into time. Then spend your money AND your time in accordance with your own personal values and priorities.

CNN Inspire Summit

CNN honored me with an invitation to participate as a featured guest panelist at their Inspire Summit: Women’s Empowerment Conference held at the Turner – Time Warner building in Manhattan last week. The program was moderated by Kyra Phillips, anchor of “CNN Newsroom”, and opened with special guest Whoopi Goldberg.

Eight women (including me) followed Whoopi’s down-to-earth, humorous and entertaining opening to share our stories and humanitarian projects that evening. Our panelist interviews concluded with the L’Oreal Paris Women Of Worth Awards.

Meeting all of these amazing women was such a thrill! Everyone’s dedication towards their special projects and causes was incredibly inspirational. The experience served as a reminder that when we follow our passion, anything is possible.

Here are abbreviated introductions of the women Kyra Phillips (CNN anchor) interviewed in front of a live audience:

Whoopi Goldberg

Whoopi Goldberg, multiple award-winning actress, comedienne, producer and television host, is also well-known for her humanitarian efforts on behalf of children, the homeless, human rights, education, substance abuse and the battle against AIDS. Whoopi is a Goodwill Ambassador to the United Nations.

Incidentally, wearing jeans, a baggy shirt and bright yellow rubber shoes, Whoopi shared why she dresses for comfort rather than high style. In a nutshell, feeling comfortable makes her happy, and when she’s happy, the people around her, in turn, feel more comfortable and happy. Makes perfect sense to me! What else makes Whoopi happy? Toto toilets. I guess you had to be there…

Molly and Carly Houlahan, Hives for Lives

Molly and Carly Houlahan, ages 16 and 14, launched Hives for Lives four years ago when their beloved grandfather died of cancer. These sisters wanted to honor his memory by raising money to find a cure. They raise bees, harvest the honey, then spin, filter and bottle it by hand. Their honey is now being distributed by nine Whole Foods regions and they’ve raised $150,000 towards a cure so far. Way to go, girls!

Patricia Hall, H2O for Life

Patricia Hall, after participating in a variety of volunteer service projects in Africa and witnessing the plight of women and girls caused by lack of water and sanitation, was compelled to bring water projects to schools in third world countries. Patricia is a teacher in Minnesota. H2O for Life was formed in 2007 after overwhelming student response to the first service learning project she initiated in her school. H2O for Life has now grown to over 80 school projects during the current 2008-2009 school year.

Majora Carter, The Majora Carter Group

Majora Carter, a South Bronx native, pursues resources and ideas to improve the quality of life in environmentally challenged communities. She founded Sustainable South Bronx and implemented the Bronx Environmental Stewardship Training program — a green-collar job training and placement system – seeding communities with a skilled workforce that has both a personal and economic stake in their urban environment.

Jessica Flannery, Kiva.org

Jessica Flannery is co-founder of Kiva.org, the world’s first peer-to-peer online microlending website. Kiva makes it possible for internet users to lend money to specific entrepreneurs in developing countries, empowering these individuals to lift themselves out of poverty. Since I pledge my blogging profits as loans to the women I find on Kiva’s website, I was thrilled to have the opportunity to meet one of the masterminds behind this brilliant online organization!

Jen Smith, Millionaire Mommy Next Door

Jen Smith learned to make, save and spend money in ways that she and her family find rewarding. Now financially-free, she’s on a mission to inspire and empower other families through financial education so they too can enjoy the life they want to live. She freely shares her recipe for success, happiness and wealth on her blog. As part of her commitment to our world-wide community, Jen pledges her blogging revenue as 0% microloans, through Kiva.org, to small businesses operated by working, impoverished women in developing countries.

Eve Ensler, Vagina Monologues

Eve Ensler, playwright, performer, feminist and activist, is best known for her play The Vagina Monologues. In 1998, Ensler launched V-Day, a global non profit that has raised over $60 million for women’s anti-violence groups.

Doris “Granny D” Haddock, Political Activist

“Granny D”, at the age of 90, walked across America to rally against the influence of big money in elections. At 94, she ran for U.S. Senate. Since then, she’s given speeches around the country to promote campaign finance reform; specifically, public funding of elections. May I live as long and as strong!

After the Summit event, my family and I stayed in New York City for three additional days to sight-see. I was in NYC during the same week last year when I appeared as a guest on The Montel Williams Show, but this was the first visit for my husband and daughter. Coming from a small western city, Manhattan is an eyeful –- especially for a three-year-old during the holiday season. We rode the (free) ferry past the Statue of Liberty, navigated the subways, ate dim sum in Chinatown, strolled around the historic Seaport Village and enjoyed views of the Brooklyn Bridge, weaved between the tall buildings and narrow streets around Wall St and the NY Stock Exchange, visited the Museum Of The City Of New York, checked email from the magnificent NY public library on Fifth Avenue and 42nd Street (marble, stately columns, European-like painted ceilings, amazing two-story carved wood bookcases), gawked at the ostentatious Christmas display windows and mega-caret diamonds along 5th Ave, stomped on the Big Piano at FAO Schwartz toy store, watched kids get their American Girl dolls dolled up at the store’s “Doll Hair Salon”, dropped in on a Santa convention, rode the carousel at Bryant Park, and saw disturbing pictures of dead people at the International Center of Photography.

What a marvelous trip!

Is Your But Too Big?

Do you have a big but problem? You’ll never be successful, happy and wealthy if your but is too big.

Here, let me show you why…

photo credit: flickr.com/photos/86954993@N00/429461958/

“But I have so little to offer.”

“But I’m too scared.”

“But I don’t have anything worthy to offer.”

“But everyone in my life keeps bursting my bubble.”

“But I’m not pretty or skinny enough.”

“But I’m broken.”

“But no one believes in me anymore.”

But I’m a victim

“But I’m a victim.”

“But everyone tells me I can’t do it.”

“But no one loves me.”

“But I’m the ugly one.”

“But I’m too old.”

“But I can’t keep up with all this new-fangled technology.”

“But my life is too complicated and I’m too entangled.”

“But it’s a dog-eat-dog world and I’m terrified of dogs.”

“But my wishes never come true.”

“But I don’t have anything unique to offer.”

“But I’m stuck (in a boring job; in my marriage; in this godforsaken town).”

“But I don’t know where to find what I need.’

“But it takes too much work.”

“But I’m broke.”

“But no one wants to help me.”

“But there’s not enough time.”

“But it’s too complicated.”


Please, already…. Shut your big but up!

The next time you hear the “big but” voice in your head, confront it. Put up your dukes and pound it to pieces. Shove those poisonous buts into your garbage disposal and pulverize them. Wash the toxic remains away and watch as they swirl down the drain and become one with the rest of the sewage.

Kick your big but’s a$$.

Until you conquer your “big but” problem, it’ll hold you back and prevent you from achieving success.

Our lives are nothing but the stories we tell ourselves. If you don’t like the story your life has become — tell yourself a better one. Think about all of the things you can do instead of the things you can’t. Start a different internal conversation and you’ll become wealthy in more ways than one.

Imagine the kind of person you want to be and think the thoughts that person would think. Act the way that person would act. Once you start behaving like this person, others will start treating you like that person. You’ll start to believe it. Then it will be true. Then you’ll be open to learn. Open to change. Open to grow. You’ll be ready to allow success, wealth and happiness into your life. Researchers find that an optimistic personal outlook is more than just seeing the bright side of things. Believing in yourself actually produces increases in good health, motivation, and achievement in most people. (Schulman, P. 1999. “Applying Learned Optimism to Increase Sales Productivity”)

Make no excuses. Allow it to happen. If it works for me, then why not you? Your new life will astound you.

(Hey now, I said no more buts!)