The Benefits of Delaying Gratification

Our 2 Cents – Episode #159

The Benefits of Delaying Gratification

In this episode of “Our 2 Cents,” Steve and Gabriel discuss the concept of delayed gratification and its impact on building wealth. But first, they’re sharing quotes of the month, their thoughts on the current national debt, and some tax-friendly states for retirees.

  1. Gabriel’s Quotes of the Month:
    • “Wealth is largely the result of habit.” — John Jacob Astor
    • “The goal isn’t more money, the goal is living life on your terms.” — Chris Brogan
  2. America’s National Debt – Is it Really a Problem?:
    • How government deficits don’t exactly work like household debt.
    • The notion of “servicing” debt as opposed to paying it off in full.
  3. States That Don’t Tax Your Nest Egg:
    • Where you live and retire can have a pretty big impact on your retirement income.
    • The states that don’t tax any income, the ones that don’t tax retirement income specifically, those who don’t tax Social Security, and the states with no tax on pensions.
  4. The Benefits of Delaying Gratification:
    • Not pausing your retirement savings to pay for more things today.
    • Not saving in only tax-deferred accounts.
    • Waiting for interest rates to go down before making big purchases.

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Podcast Transcript

Announcer: You are listening to Our 2 Cents, with the team from SGL Financial. Building wealth for life. Steve Lewit is the president of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.

Gabriel Lewit: And welcome to Our 2 Cents. We’ve got, of course, cent number one, Gabriel. Cent number two, Steve. Producer Katie in the room. And a great show lined up for you. We hope you’re doing good.

Steve Lewit: Oh, my God.

Gabriel Lewit: I was trying to mix up my opening.

Steve Lewit: What did you drink this morning?

Gabriel Lewit: I had a coffee and I’m currently drinking an Arnold Palmer.

Steve Lewit: Oh, my gosh. Okay.

Gabriel Lewit: An Arnie.

Steve Lewit: Sugar and caffeine.

Gabriel Lewit: Arnold Palmer light, actually.

Steve Lewit: It’s a great way to start, sugar and caffeine.

Gabriel Lewit: Not that much sugar, it’s light. It’s half artificial sugar.

Steve Lewit: Right, right. Yeah. Well-

Gabriel Lewit: Happy day to you.

Steve Lewit: Happy day to you.

Gabriel Lewit: Happy night. Wherever you are, whenever it is.

Steve Lewit: Are you going to say what day this is?

Gabriel Lewit: Well, today is Wednesday, and it’s December 6th. And it is a glorious day.

Steve Lewit: It is a phenomenal day.

Gabriel Lewit: It is indeed.

Steve Lewit: Yeah.

Gabriel Lewit: And so, we’ve got a smorgasbord of ideas to talk through with you here today.

Steve Lewit: You’re not going to tell everybody why it’s such a phenomenal day.

Gabriel Lewit: I don’t know what you’re talking about.

Steve Lewit: It starts with a B and a D-

Gabriel Lewit: Oh, your birthday?

Steve Lewit: Mm-hmm.

Gabriel Lewit: Oh, well, I didn’t know if you wanted me to say it was your birthday. You don’t like-

Steve Lewit: I don’t count. Here’s the deal. It is my birthday folks, but I don’t ever think of years. I don’t count them. But this year, I don’t know. It’s just, I feel like I should celebrate my birthday.

Gabriel Lewit: Well, there you go. Well, happy birthday.

Steve Lewit: Well, thank you.

Gabriel Lewit: I didn’t think you wanted me to share that with the world.

Steve Lewit: Well, at first I didn’t. And I said, what the heck? These are all friends. And, why not? I don’t know. I felt like it would be a good thing to say.

Gabriel Lewit: I would sing to you, except for I’m not going to sing on the show.

Steve Lewit: And that’s why I wanted you to say it so you could sing to me. Come on, let’s go.

Gabriel Lewit: That’s the best you’re going to get. I don’t have a good singing voice folks.

Steve Lewit: Actually, you do.

Gabriel Lewit: As a side note.

Steve Lewit: Yes, you do.

Gabriel Lewit: I think I have an okay radio voice.

Steve Lewit: You got a great radio voice.

Gabriel Lewit: But not singing. You don’t want hear me sing, I promise.

Steve Lewit: Now I want to hear you sing.

Gabriel Lewit: Yeah, I’m sure. Just for laughs.

Steve Lewit: Yeah, for laughs.

Gabriel Lewit: Well, okay, let’s jump in here. I wanted to kick off today with some… We sometimes talk about some little quotes here and there to inspire. And so I’ve got some quotes of the month. It’s now December, and we wanted to give you some inspiration here. And so the first… We always have producer Katie look these up because we never know who the people are. I just find the quote and then I wait to get surprised on the show. But we have, look, here’s the quote. “Wealth is largely the result of habit.” And this comes from John Jacob Astor.

Steve Lewit: New York mogul, right?

Gabriel Lewit: Producer Katie pulled him up on Google.

Steve Lewit: Very wealthy. Super wealthy, am I right?

Gabriel Lewit: He’s a German-born American businessman, merchant, real estate mogul and investor.

Steve Lewit: I used the word mogul.

Gabriel Lewit: And he was born on July 17th, 1763.

Steve Lewit: Brilliant. See, I used mogul. Was he in New York?

Gabriel Lewit: He died in New York, New York.

Steve Lewit: Yeah. Because there’s Astor something in New York. Yeah, he was a New Yorker.

Gabriel Lewit: New Yorker.

Steve Lewit: A New Yorker.

Gabriel Lewit: What do you think of that quote? “Wealth is largely the result of habit.”

Steve Lewit: Oh, I think it has some merit.

Gabriel Lewit: Well, part of why I chose this one is we’re going to talk today about the power of delayed gratification, and how it can impact your wealth accumulation. And one of the things that you’ll find when we get to that point is delayed gratification is what? A habit.

Steve Lewit: A habit.

Gabriel Lewit: I was going to wait. I didn’t want you to get it wrong, so I jumped in.

Steve Lewit: Okay, thank you.

Gabriel Lewit: Yeah. So wealth is largely the result of habits, like saving, like delaying gratification for bigger purchases, like being diligent with-

Steve Lewit: Your investment approach, and with your budget.

Gabriel Lewit: Lots of habits can really become very effective for you in building wealth.

Steve Lewit: So, anything a habit can be a good habit or not a good habit. Because it’s also a habit to spend too much or to be impulsive and do all those kinds of things as well.

Gabriel Lewit: Correct. I think if we were clarifying Mr. John Jacob Astor, it would be wealth is largely the result of good habits.

Steve Lewit: Yes. Yes.

Gabriel Lewit: And avoiding bad habits.

Steve Lewit: And the reason I said it has some merit is that wealth is also a matter of understanding and making wise decisions about what you do with your money and how you do it. And that not necessarily… Making wise decisions is not a habit, it’s something you got to think through and get all the information and know what you’re doing.

Gabriel Lewit: Well, that’s a nice lead in here into my second quote for this one.

Steve Lewit: Oh, my gosh.

Gabriel Lewit: Thank you very much.

Steve Lewit: What did I do?

Gabriel Lewit: Okay, well, quote number two is, “The goal isn’t more money, the goal is living life on your terms.” By a fellow named Chris Brogan.

Steve Lewit: Chris Brogan. Wasn’t he a comedian?

Gabriel Lewit: Chris Brogan is a… This is Google, it sounds like I know this stuff. He’s an American author, journalist, marketing consultant, and speaker about social media marketing. According to Wikipedia. Okay. Mr. Chris says, “The goal isn’t more money, the goal is living life on your terms.”

Steve Lewit: You bet.

Gabriel Lewit: What say you about that birthday man?

Steve Lewit: I say, live your life on your terms. Live your life how you’re inspired. Be who you are, and then figure out how you can afford it. But you got to know who you are and how you’re going to live. What I think he’s saying here is that money is what we always say, Gabriel. Fuel for the journey. It’s not the journey.

Gabriel Lewit: Well, one of our taglines here at SGL Financial is, it’s not just about your money, it’s about your life. And we do encourage our clients not to just build more money just to have more money. Nothing wrong with that, we manage more for you, we build more wealth. It’s good for everybody. But we really want you to go out there and enjoy your life and use the money that you’ve saved and built and accumulated to find enjoyment.

Steve Lewit: And we’ve said this before, we have clients that have a lot of wealth and won’t spend it because they want to cling to the money because it’s there.

Gabriel Lewit: Sometimes it’s easier said than done to live on your terms and not think about the money side. Sometimes we focus a lot on the money side of things, and sometimes we over focus on it. And it can be good to pull back and look at the bigger picture.

Steve Lewit: Yeah. And a lot has to do with our upbringing. If we’re brought up in a family that did not have much wealth or was very frugal or very stingy or cheap, any way you want to frame it, if that’s what was input into us-

Gabriel Lewit: Spending-challenged.

Steve Lewit: Yeah, spending-challenged. Well, that becomes a habit. That’s one of those habits of I won’t spend money and I feel good about it. But I find some people will do things for the first time that they thought they would never do and didn’t want to do, and all of a sudden they love doing it. I’ll give an extreme example, like flying first class. A lot of folks can afford to fly first class, which is better than flying coach, and they just won’t because it’s ridiculously expensive.

Gabriel Lewit: Well, maybe you just want to live your life on your terms with poor legroom, and the bathroom right behind you.

Steve Lewit: Well, if that’s who you are. No, that’s fine if that’s where your joy is. But this whole idea of knowing yourself and knowing where you are and where you’re headed. And what do you really, really want to do?

Gabriel Lewit: I can tell you I do not want to sit by the bathroom on an airplane.

Steve Lewit: That is the worst.

Gabriel Lewit: It’s the worst.

Steve Lewit: It is the worst.

Gabriel Lewit: Oh, man. If you’ve never had that joy-

Steve Lewit: The luxury of seat number 123.

Gabriel Lewit: Yeah. All right. Well, okay. Well, hopefully that gives you some food for thought here to kick off our show for today. I wanted to talk about a couple smaller topics here first before we dive into delayed gratification and all sorts of fun things related to that. I wanted to give you-

Steve Lewit: We’re delaying the gratification.

Gabriel Lewit: We are, yes.

Steve Lewit: Of the gratification.

Gabriel Lewit: We wanted to give you an update and just chat just a little bit about the national debt.

Steve Lewit: Is there a debt?

Gabriel Lewit: Unless you’ve been living out in the woods like a forest boy or girl, you probably have noticed there’s lots of talk about the rising national debt for America. And what I-

Steve Lewit: 34 trillion.

Gabriel Lewit: Yeah, 34 trillion. That’s T with a… Trillion with a T [inaudible 00:09:42]-

Steve Lewit: 12 zeros.

Gabriel Lewit: It can be hard to fathom or quantify how much money that is. But there’s an interesting take in this article that I pulled.

Steve Lewit: Football fields of money.

Gabriel Lewit: Okay. Which is, is it really a problem?

Steve Lewit: Yes.

Gabriel Lewit: Okay. And there is some arguments. I’m going to take a little bit of a, what’s the word, devil’s advocate case here?

Steve Lewit: Well, it’s not devil’s advocate.

Gabriel Lewit: For you-

Steve Lewit: There are people that are-

Gabriel Lewit: You’ve even said on the show, there’s people that think that it may not be-

Steve Lewit: Have a different point of view. I don’t know if it’s the devil’s advocate.

Gabriel Lewit: Well, here’s the different point of view is that a lot of people, when they hear that number, they think and relate the country’s national debt to personal debt.

Steve Lewit: Yes.

Gabriel Lewit: Okay. Now, if you had 12… Sorry, $33 trillion of personal debt, I think that would be a problem.

Steve Lewit: But go on to the next step in the article, you have to finish that.

Gabriel Lewit: Okay, let me ask you a question. Let’s use a more normal number. If you had a-

Steve Lewit: I’m trying to help you here.

Gabriel Lewit: If you had $100,000 on a credit card.

Steve Lewit: Yes.

Gabriel Lewit: Here’s the question. Do you have to pay that back?

Steve Lewit: Only when I die.

Gabriel Lewit: Does it have to get paid back?

Steve Lewit: Yes. Yes. But I can delay it until my death. Then it has to get paid off. Because the credit card gets closed and it has to be paid off. Now, the national debt, the government never dies.

Gabriel Lewit: It does not die.

Steve Lewit: So, the argument is, I’m doing your job for you, I just want you to know.

Gabriel Lewit: Good. I’m glad you are.

Steve Lewit: I’m doing your job.

Gabriel Lewit: You’re the birthday boy, you get to enjoy all the perks of today.

Steve Lewit: The argument is, because the country never dies, the debt never has to be paid. All that has to be paid-

Gabriel Lewit: All in a lump sum.

Steve Lewit: In a lump sum.

Gabriel Lewit: Yeah.

Steve Lewit: It never comes-

Gabriel Lewit: It can continue to get extended.

Steve Lewit: And it never comes due. The only thing that’s due is the interest on the national debt, that has to be paid. The interest on the national debt is 522 billion, which is a lot less than 34 trillion. And this guy here who’s an economist, I forgot. What’s his name in the article?

Gabriel Lewit: Oh, the gentleman?

Steve Lewit: Yeah.

Gabriel Lewit: He’s Yahoo Finance.

Steve Lewit: No, no, no, he’s-

Gabriel Lewit: I’m kidding, normally it’s right on the top. It’s Nobel Prize winning economist Paul Krugman. Yeah.

Steve Lewit: Krugman. Krugman. Yeah. He’s a pretty bright guy. And his argument-

Gabriel Lewit: He’s Nobel Prize winning.

Steve Lewit: Well, yeah.

Gabriel Lewit: That’s usually something.

Steve Lewit: Pretty bright guy. Yeah. I’m just saying-

Gabriel Lewit: I don’t have a Nobel Prize.

Steve Lewit: But you’re a pretty bright guy too. You should become an economist. So he’s saying, look, man, what are you worried about? So there’s a lot of debt, it never comes due. There’s no reason that-

Gabriel Lewit: Well, and I think when people hear that, when people hear this big number, and we’re going to give you points and counterpoints as food for thought. But when you hear this big number, we’re all taught on a personal side, you want to bring in more than you spend. And that’s a little different than how the country operates.

Steve Lewit: Yes.

Gabriel Lewit: Would you say?

Steve Lewit: Well, again, never… Look, the problem with debt is not the debt. The problem with debt is when it comes due. And do you have the money to pay it? Businesses borrow money all the time, but they have to be very careful that they have the money to pay the debt because the debt isn’t forever. This debt is forever debt. And the argument is, well, if it’s forever debt, what is everybody worried about? Because nobody’s going to live forever, but the country will sustain itself, the debt never has to get paid. You could have incredibly high levels of debt.

This is the article. I don’t agree with the article, but this is what the statement… And it’s very compelling. It’s very compelling. The problem that I have with it is you say, well, the debt, it never comes due. But there are instances where the debt could come due, where people call bonds or sell them, or there’s something that could go wrong. And when you have that burden of debt, when something goes wrong it’s very hard to manage it. And I don’t know what the something is. Those are called black sheep events that happen like at the end of-

Gabriel Lewit: Black sheep or black swan?

Steve Lewit: Black swan, sorry. I’m going to win the Nobel Prize.

Gabriel Lewit: The black sheep event. I like that.

Steve Lewit: I just called a new-

Gabriel Lewit: I’m not sure what that is. Sounds fun.

Steve Lewit: I’m going to write the Nobel Committee. In the 1990s, the dotcom era busted, and that was a black swan event. 2008 was a black swan event. What is the black swan event that we can’t see where national debt becomes a huge problem? And the bigger it is, the bigger the problem it is. I think it’s a bad idea to build debt with this idea of, well, it doesn’t matter.

Gabriel Lewit: Interesting. Well, that was about all I wanted to talk about this. I didn’t want to get into a major discussion point. I just thought we’re always talking about, and I generally agree with you, I think limiting as much as one can the debt increases and running a slightly more conservative country from a budget perspective. It’d be good to make sure you’ve got money coming in to fund everything. But there’s a lot of people a lot smarter than me probably calculating this stuff, I would think.

Steve Lewit: Well, Paul Krugman is. And yeah, but most economists will argue differently. But he is an amazing man. I know his work and it’s very compelling. Very compelling what he has to say.

Gabriel Lewit: Yeah. Well, just as a pause point, if you have questions or thoughts on the national debt, certainly it can end up being a polarizing topic. I’d love to hear your thoughts, send them on into the show. Kind of like our Tootsie Roll poll the other day where a lot of people wrote in, what are your thoughts? Do you worry about the national debt? Does it keep you up at night? Do you think it should be paid down? Do you think it doesn’t need to be paid down? Send us your thoughts, we can give some feedback on the show next time. And you can email us, and we’d love to hear from you of course.

Steve Lewit: Do you know what’s really sad?

Gabriel Lewit: What?

Steve Lewit: This is really, really sad, folks. Our biggest response… How many shows have we done? Katie, how many shows have we done?

Gabriel Lewit: Let’s see.

Producer Katie: About 160.

Gabriel Lewit: 160 shows.

Steve Lewit: We’ve done 160 shows, folks. And our biggest response was on Tootsie Rolls.

Gabriel Lewit: Well, it was a hot button.

Steve Lewit: It was a hot topic.

Gabriel Lewit: What can you say? I struck a chord when I said that I didn’t know of anybody that liked Tootsie Rolls. I now retracted that, and I get it.

Steve Lewit: You got creamed on that.

Gabriel Lewit: Yeah, it’s kind of funny. All right. Well, one other little topic here before we get too delayed gratification. You see what I’m doing here?

Steve Lewit: You’re really annoying me. I want to get gratified.

Gabriel Lewit: Yeah, I know, I know. It’s hard. Delayed gratification’s hard. All right, we wanted to just talk and give you some updates, in case you’re not aware, of all the states that don’t tax your retirement income.

Steve Lewit: Yep. A bunch.

Gabriel Lewit: There are a bunch. Let me set the table here. There are some states that do tax your retirement income and there are some states that don’t. And the question is, by and large, would you prefer to live in one of the states that do or don’t tax your retirement income?

Steve Lewit: Well, let’s define what is retirement income? Retirement income is anything that comes out of a retirement fund like a 401(k), an IRA, 457, a SEP.

Gabriel Lewit: Pension.

Steve Lewit: Pensions.

Gabriel Lewit: Social security.

Steve Lewit: Social security, annuities. What else is there? Yeah, that’s about it. 457s, did we say that?

Gabriel Lewit: I think you did.

Steve Lewit: 403(b)s.

Gabriel Lewit: Yep. Similar to 401K. Yeah. Well, the question is, if you could avoid being taxed on those, would you be able to stretch your retirement dollars further? And that’s a big strategy for some people. Is wherever you live today, they say to themselves, I’m going to make sure I retire in a state that’s very tax friendly for retirees. And so that’s what we wanted to talk about here are, which states are more friendly versus less friendly from a retirement income perspective? Okay, let’s start with no income tax. There are nine states that don’t tax any income, whether it’s paycheck or income from your 401K, IRA, pension, social security, et cetera. Okay. Those states, and you be honest with yourself, if you knew all these when I read off the list in advance. Can you guess what they are? Mr. Lewit, you want to read the list, birthday man?

Steve Lewit: Oh no, go ahead, you. I wasn’t open to the page. Go ahead.

Gabriel Lewit: Yeah. These states, in order of alphabetical-ness are… Or alphabetical order, as they say. Alaska, Florida, Nevada, New Hampshire, although it does tax interest and dividends in New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Steve Lewit: Remember folks, we’re talking about the state income tax, not the federal income tax.

Gabriel Lewit: Right. Yeah. These are states that do not tax income, period. Okay? That is something. Now, there’s other types of taxes you got to be aware about, real estate tax and sales taxes, and all sorts of things like that. But if you do the numbers, not paying any taxes on any income whatsoever can be very attractive.

Steve Lewit: And if you look at many of the professional athletes, where are they moving to? They’re moving to Florida.

Gabriel Lewit: Florida.

Steve Lewit: Or one of these states, because they get millions of dollars at stake.

Gabriel Lewit: Make a big deal. Yeah. Okay. No income tax on retirement income, now that’s more of a subset of income. You’ve got Illinois, ring, ring, ring.

Steve Lewit: One of the few tax benefits of this state.

Gabriel Lewit: You’ve got Iowa. Okay.

Steve Lewit: Nice place.

Gabriel Lewit: You’ve got Mississippi.

Steve Lewit: No, I don’t-

Gabriel Lewit: There’s certain requirements there. We’re not getting into those today. And Pennsylvania. Pennsylvania, Mississippi, Iowa, and Illinois.

Steve Lewit: There’s only four?

Gabriel Lewit: There’s only four.

Steve Lewit: I didn’t realize that.

Gabriel Lewit: Okay. That do not tax retirement income as a whole.

Steve Lewit: Yeah, that’s a-

Gabriel Lewit: But they tax other incomes.

Steve Lewit: You know what? That’s a shorter list than… That’s a big deal for Illinois. It keeps a lot of people here.

Gabriel Lewit: Yeah. No, it’s actually generally, other than high property taxes, a fairly tax friendly state.

Steve Lewit: Yes.

Gabriel Lewit: Okay?

Steve Lewit: Yes.

Gabriel Lewit: Okay. Now how about no tax on social security? There’s actually a long list, 39 states and the District of Columbia that do not tax social security benefits. And those are Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts. Oh, man, there’s a bunch more. If you want the full list-

Steve Lewit: It would’ve been easier to read the four that do.

Gabriel Lewit: I was going to try to do them all, but then it was too much.

Steve Lewit: Too much. That’s too much.

Gabriel Lewit: Okay. But you get the gist. There’s some states that do tax other benefits but do not tax social security. Okay? There’s also 15 states that don’t tax pensions, but do tax other items as well. All right. What’s the point of all this? The point is, if you hadn’t thought about this and how it could impact your retirement, where you live can have a pretty big change on how much you do or don’t pay in taxes.

Steve Lewit: Yeah. From an income perspective and from an estate tax, which this doesn’t list perspective. Because if you have a sizable estate, like in Illinois, if you’re over $4 million, that’s the exemption. Now you’ve got an Illinois estate tax problem, and that could cost you a substantial amount of your savings that would otherwise go to the kids. Or you could spend it.

Gabriel Lewit: Yes. Yes, yes, yes.

Steve Lewit: Yes, yes, yes.

Gabriel Lewit: Well, we sometimes talk about this idea of a zero-tax plan, and if that’s something you ever wanted to do, you’d have to focus on where you live.

Steve Lewit: Maybe we should delay our gratification to the next show.

Gabriel Lewit: Yeah. You think? Well, maybe we’ll do a little bit on this show, a little bit of the next show. Because there’s different things to talk about here.

Steve Lewit: I’m just encouraging you to do something.

Gabriel Lewit: Are you ready?

Steve Lewit: I’m ready. I’ll tell you, I’m nervous. I’m sweating. I’m so sweating.

Gabriel Lewit: Well, it can be hard when you have to wait to get the things that you want.

Steve Lewit: It can be.

Gabriel Lewit: And that is in fact the definition of the power of delayed gratification when it comes to building wealth and saving for retirement. In fact, one would say saving for retirement itself is the ultimate act of delayed gratification, because you are choosing electively every year not to spend money today to have money to spend in the future.

Steve Lewit: You’re putting off to tomorrow what you could have enjoyed today.

Gabriel Lewit: Yes, indeed.

Steve Lewit: I’m going to delay my impulse to make myself happy today, because I know long-term it’s not going to work out for me.

Gabriel Lewit: Yeah. We’re going to talk about the things that are beneficial to delay gratification on in the efforts of improving your finances.

Steve Lewit: Or not. Or not. Yes.

Gabriel Lewit: The first one, of course, is just as we mentioned, saving for retirement. And when do you find that, in your opinion and experience, dad, when would you say most people really start saving, hunkering down and decide, I shouldn’t delay this anymore, I’ve got to start saving for retirement?

Steve Lewit: The R word pops up in people’s heads, I’d say as soon as they see the kids getting out of the house and the big expenses of home and children and college, and those start too. Because that’s when it’s really hard to save. As soon as those expenses and those pressures are relieved, people start saying, “Well, we should start thinking about retiring.” And hopefully that’s not at 64 when you’re going to retire at 65. Hopefully that’s at 55.

Gabriel Lewit: So, people start-

Steve Lewit: About 55, 50.

Gabriel Lewit: … delaying when they feel like their pocketbook isn’t as pinched as it otherwise would be.

Steve Lewit: And usually-

Gabriel Lewit: They’re only willing to delay so much gratification.

Steve Lewit: Well, they can’t. Part of it is that they can’t, they’ve got only so much money and the expense is a huge one. Well, you’re in the middle of it right now.

Gabriel Lewit: Well, I’m saving.

Steve Lewit: Yeah, I know you are, but you’re very fortunate.

Gabriel Lewit: I could spend more if I didn’t save, but I’m delaying some gratification.

Steve Lewit: No, you’re not, you just built out your whole backyard.

Gabriel Lewit: I’m still saving. I do lots of things.

Steve Lewit: You are still saving.

Gabriel Lewit: I don’t think you know how much I save.

Steve Lewit: I do. I think I do, but [inaudible 00:25:08]-

Gabriel Lewit: But I also spend.

Steve Lewit: You did not-

Gabriel Lewit: I’m actually a big fan of balance. I don’t like-

Steve Lewit: You did not delay that gratification.

Gabriel Lewit: Well, actually I did for many, many years.

Steve Lewit: That’s true. I give you credit.

Gabriel Lewit: I saved up for a big project that I completed in my yard, in my home.

Steve Lewit: And it’s beautiful.

Gabriel Lewit: And I delayed that gratification while I saved.

Steve Lewit: You did. You did.

Gabriel Lewit: See? Yeah. There you have it.

Steve Lewit: I stand corrected.

Gabriel Lewit: Yep.

Steve Lewit: All right.

Gabriel Lewit: Now, what are some of the other ways that people sometimes don’t delay gratification for, and I’ll give you a clear example. It’s choosing a pre-tax IRA or 401K versus a Roth IRA or 401K.

Steve Lewit: Yeah. I just want to get back to the 401K. When the budget is tight, a lot of people will not contribute to the 401(k), or cut it way back, or won’t even take the match. Because they can’t. There’s always room, I believe, to squeeze out something for savings in a budget. I really believe that. And a lot of people that say, “No, no, I can’t. I got to have this, I got to have this. I got to have-

Gabriel Lewit: Well, people call it the latte effect. There’s many names for it. Whereas, if you didn’t buy the Starbucks every day, you’d have an extra 150 bucks a month.

Steve Lewit: Yeah. Something.

Gabriel Lewit: If you save that for 12 months, that’s $1,800 a year. And if you save that for 30 years-

Steve Lewit: And the fact is, I want my Starbucks, I’m not going to delay the gratification on that, so I save less.

Gabriel Lewit: But somewhere in your budget you’d have to delay in order to save.

Steve Lewit: Exactly.

Gabriel Lewit: Yeah, exactly. So going back to the question, if you are going to save, then we can get into delaying what we’ll call tax gratification. What a lot of people choose to do is, oh, I’m going to choose the pre-tax option, because that’s going to give me a tax break today and I’m going to be able to spend a little bit more. Versus the Roth option, which I get taxed today, but in the future I would be forever tax-free.

Steve Lewit: Yes.

Gabriel Lewit: What do most people choose in your experience, Mr. Birthday Lewis?

Steve Lewit: Well, it’s really interesting because up until about four or five years ago everybody would put money in the pre-tax, because they wanted the tax deduction and be able to spend more money for themselves. But that is shifting because of the national debt that we talked about earlier. Many people, like myself, believe tax is going to go up in future. So if you can delay that spending, you’ll have a better retirement and a more lucrative, a wealthier rest of your life by delaying that gratification of not spending now and paying the taxes.

Gabriel Lewit: Paying the taxes today.

Steve Lewit: Roth options and 401(k)s are getting very, very popular.

Gabriel Lewit: Yeah, but you really do… If you’re 25 and you’re not going to be able to withdraw from that Roth until you’re 59 and a half, you are certainly delaying the gratification of not owing taxes on that money. Whereas, you can certainly feel like if I save a couple thousand dollars today by using pre-tax options, well, I can go spend that money.

Steve Lewit: Well, you know Gabriel, there are some people that are short-term thinkers, and other people that are long-term thinkers. And the short-term thinkers think short-term. And if I can spend more money today, I’ll worry about the taxes in the future when I get there.

Gabriel Lewit: Yeah. Well, I want to give one more example today that’s very relevant and timely to delaying gratification.

Steve Lewit: And I’m starting to feel a little more gratified that we finally got to this. I just want you to know.

Gabriel Lewit: Good, good. Well, the two timely things are, gosh, I really would like to buy a house. I’d like to take a loan for some improvements, or I’d like to buy a car. And what’s the common denominator with all of those things right now in the current environment, if you want to do those different items, buy a car, take a loan, buy a house?

Steve Lewit: You’re going to pay through the nose in interest rates.

Gabriel Lewit: You’re going to pay through the nose in interest, and lock that interest in. Generally, if it’s a fixed rate, certain things can be refinanced, certain things are harder to refinance. But for many people they lock those rates in. What is the deferred gratification variant of that, Mr. Lewit?

Steve Lewit: The deferred gratification is keeping your car for another year?

Gabriel Lewit: Waiting for interest rates to-

Steve Lewit: Waiting for interest rates to go down.

Gabriel Lewit: Yeah, to come down.

Steve Lewit: And that could be a long wait.

Gabriel Lewit: Well, and during the pandemic it’s similar people where prices were sky-high because of supply chain. I’m sure that’s two words you never wanted to hear again, supply chain disruptions.

Steve Lewit: I love that. I love that.

Gabriel Lewit: People were like, do I spend double for a deck, or do I wait it out a couple years and wait for lumber prices to come back down? And a lot of people waited, and they’re being rewarded for that now. And a lot of people didn’t, and they paid through the nose. And so I think you’re going to see-

Steve Lewit: And it depends on your wealth. If you’re wealthier and you can afford to pay through the nose and you know you’re paying through the nose and make a conscious decision, well so be it.

Gabriel Lewit: Yeah.

Steve Lewit: The problem is if it starts running you into the ground in 10 years because you spent all that money and now you’re short money, that’s where life becomes more difficult. And that’s where money creates a lot of emotions, negative emotions, which actually creates a lot of bad health.

Gabriel Lewit: And to circle back to where we started, as John Jacob Astor said, “Wealth is largely the result of habit.” And delaying that gratification can be a very good habit to help you build greater wealth when used properly.

Steve Lewit: Yes, yes.

Gabriel Lewit: That’s what we wanted to cover here today on Mr. Lewis’s birthday. Any birthday thoughts that you’d like to share with our audience?

Steve Lewit: Yes. Time flies. Make the best of it. Live your life.

Gabriel Lewit: And eat cookies.

Steve Lewit: And eat cookies. Chocolate chip cookies.

Gabriel Lewit: You were delivered cookies by our team today.

Steve Lewit: Kate made the best cookies. She makes the best cookies. And folks, this morning on my desk was a beautiful box of these great cookies.

Gabriel Lewit: I think it was a Tupperware container.

Steve Lewit: Yeah, it’s Tupper… Well.

Gabriel Lewit: Beautiful.

Steve Lewit: You had to ruin the set. It was so romantic.

Gabriel Lewit: I like yinging to your yang.

Steve Lewit: But here’s the problem, everybody’s eating my cookies.

Gabriel Lewit: No, you said everyone could have some.

Steve Lewit: Yeah, but they were coming in before I even said that. But I was going to give it to everybody anyway.

Gabriel Lewit: Well, that’s very nice of you. Well, we hope that you have a wonderful, wonderful birthday, Mr. Lewit.

Steve Lewit: Thank you.

Gabriel Lewit: From me and on behalf of our entire audience-

Steve Lewit: Thank you.

Gabriel Lewit: … happy birthday.

Steve Lewit: Thank you.

Gabriel Lewit: And on behalf of us, SGL, to you, our audience, we wish you a happy day. Just it’s not a birthday. Just a happy day.

Steve Lewit: You’re on a roll, a theme.

Gabriel Lewit: And we can’t wait to talk to you on the next show. If you have questions on any of this, call us (847) 499-3330.

Steve Lewit: And a happy evening.

Gabriel Lewit: Go to our website,, or email us

Steve Lewit: Have a happy phone call, have a happy email.

Gabriel Lewit: Do we have to pull your mic?

Steve Lewit: Yes, you do.

Gabriel Lewit: Yeah. Okay. Well, thank you all. Have a wonderful rest of your day.

Steve Lewit: Stay well everybody.

Gabriel Lewit: Bye now. Bye.

Announcer: Thanks for listening to Our 2 Cents, with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at (847) 499-3330. Or visit us on the web at And be sure to subscribe to join us on next week’s episode.

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