Updated on 09.17.14

The Short and Long Term Choices

Trent Hamm

Short Term Parking.  Photo by whatleydude.For many people, junk food is a serious temptation. It helps them feel a sense of comfort. It provides a quick burst of flavor. It helps them de-stress. It provides an energy boost at an opportune moment. In the short term, it’s a big gain.

In the long term, though, it’s a different story. It causes weight gain and other health problems. It can cause a negative body image and make people feel worse about themselves. Those effects cause an overall negative emotional sense, so they turn to the things that comfort them.

Many things in modern life follow that same structure: they’re nice in the short term, but incredibly painful in the long term. Credit card debt – you get what you want in the short term, but you wind up paying a ton of debt over the long term. Diapers – we use the convenient disposables for now, but later we lament filling up landfills with things that will take many, many years to biodegrade. A home mortgage – you get to move into a home, but you make huge interest payments for many years.

Again and again, humans choose to value the short term over the long term. We do it with countless daily actions each day, from the food we eat to the activities we choose to fill our time with. Our focus is on the now, not on the five years from now.

This is natural, though. Throughout the course of human history, humans have spent most of their time living a true hand-to-mouth existence. Our hunter-gatherer ancestors constantly benefitted by keeping their eyes on the immediate prize – the food in their stomach today and this winter, nothing else. Agriculture took many, many millennia to take off, and it’s easy to see why – you have to see some real success at agriculture to see it beating the benefits of picking a bunch of wild berries.

Today, though, we live in a different world. Food will be available tomorrow, but many of us still behave as though it might not be. There are thousands of apartments and rentals in most areas, but we buy a home because it fits our needs better – but our biggest “need” is simply a false sense of stability.

I do this myself all the time.

My focus is always on the short term with The Simple Dollar. I obsess mostly over the posts for the next week or so, without often worrying about anything beyond that. On the occasions when I do focus on the long term (like writing books, writing and preparing downloadables, working on projects with other bloggers, and so on), I usually find that over a longer period, I’m glad I did it.

I often try to put off meals that take a long time to prepare because, in the short term, I don’t want to make that time investment. Over the long haul, though, the great meals I enjoy and remember are often the ones I spend a long time on – the pasta made from scratch, the coq au vin cooked slowly and carefully, and so on.

Some days, I do not want to go exercise at all. It seems like a short term gain to just relax and kick back. I could read a book, after all, instead of going out there, getting out of breath, getting all sweaty, and having my legs feel like lead. If I don’t do it regularly, though, my daily life goes down in quality. I have less energy. I have less motivation to do … well, anything. I gain weight and my body image goes downhill, as does my appearance to others.

Sometimes I’m tempted to go the easy route when with my kids. Why don’t we just play in the backyard instead of loading up and going to a state park? It’s rainy – let’s just watch a movie instead of getting out all of the art supplies. In five years, though, what will have built a stronger bond with my kids? Time spent doing something adventurous and creative with their father, or time spent sitting on the couch or playing on the backyard slide?

In each case, the simple choice in the short term is far from the most enjoyable choice in the long term. However, the pain in the long term from the “easy” choice is far, far worse than the short term disadvantage.

Here’s an interesting exercise to highlight how much the phenomenon impacts your life. Spend a day thinking about what this activity will be worth to you in five years. If you eat that junk food, will the impact on you be positive or negative five years down the road? What about if you eat spinach instead? What will be the impact on you if you buy that DVD five years down the road? What if you put that cash towards your debt instead?

You make the little choices every single day to build your future. The better your choices, the better your life will be.

So, today, eat a little broccoli and save a few pennies. Over the long term, big dividends will be paid out.

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  1. Michael says:

    Here’s a more difficult choice between short and long term. Should we put money in an emergency fund or pay down our mortgage? Paying down a mortgage does not benefit us until the mortgage is paid off. An emergency fund benefits us now.

  2. Michael says:

    (Before some smart-aleck says “both,” keep in mind I can only save so much money.)

  3. Maarten (from the Netherlands) says:

    Thank you Trent! Las week I decided (at age 43) to enter University and finally get a degree (in English Literature). During the last few days however my girlfriend and I had a few financial setbacks and I considered a cancellation of my University-entry (to save the money we need now).
    But reading your post really motivates me to press on and start reading English. What will this activity be worth to me in five years? A lot!! Not only a life-long dream fullfilled, but also a new career; one that really inspires me.

  4. Craig Ford says:

    I loved this post. “Throughout the course of human history, humans have spent most of their time living a true hand-to-mouth existence.” I agree. Interestingly still today many around the world live in such circumstances. I live in a third world country (Papua New Guinea) and because they do not have means to preserve (no bank accounts, no refrigeration, no safe place for valuables) everything they receive is for today. It is difficult to teach people who are so concerned about surviving today to start to thinking about tomorrow. But, this mindset will keep people stationary in the future. I guess in the hierarchy of human need our instinct is to take care of today before we worry about tomorrow. But, until the future becomes as important as the present there will be no progress. Thanks for the encouragement to set some goals for the distant tomorrows.

  5. Bev says:

    I don’t understand why you recommend renting over buying. In both cases I have to make a monthly payment of a similar amount, but rent will go up each year and is payable forever, a mortgage remains fixed and will eventually end. Not to mention the price of property does generally rise over the long term.

  6. Trent Hamm Trent says:

    The comparison should be between the amount paid in rent and the amount paid in interest on a mortgage. Both are complete losses, but in most cases, the rent amount is less than the interest amount on a similar house, particularly early in the mortgage.

  7. Michael says:

    No, renting a similar house costs more per month than mortgage + taxes would cost. How else could a landlord with a mortgage make a profit? In my area, a house mortgaged for $900/month (including taxes etc.) would cost at least $1,200/month as a rental.

    Generally, renting is cheaper when one rents a non-equivalent house, like an apartment or a smaller house or a house in a bad neighborhood.

  8. I use this “what if” scenario quite frequently, especially as my family and I were paying off our debt over the last few years.

  9. Troy says:

    Emergency fund.

    Paying down your mortgage systematically is foolish. IT is one of the worst peices of financial advice that exists.

    The point is to pay OFF your debt, not down.

    When you make extra payments to a mortgage, that extra money is now gone and can be used for nothing more. So as you pay down a mortgage you transfer risk from the bank to yourself.

    Why would anyone want to knowingly transfer risk to themselves if it wasn’t necessary.

    Don’t get me wrong, I am all for no mortgage. I think paying off a mortgage is more important than investing for retirement, college or anything else. I am definately on the pay off your mortgage before investing to arbitrate your gains bandwagon.

    But I do not subscribe to the systematic paying down of a home loan as a wise move.

    Instead, use disclipline.

    Instead, take the extra money and place it in a fixed, insured account (CD, MM, high yield savings, whatever). When the account gets high enough to pay off the entire balance in full, go for it. The difference in rate is minimal, and more than offset by the reduction in risk.

    The reason for this is not arbitration, or tax deductions or anything else other than risk aversion and security. By you maintaing liquid cash and your lender maintaining a normal higher mortgage balance, you are keeping most of the risk on the lender, while offsetting most of that risk with cash.

    IF you make 300 payments on time on a 30 year mortgage, and have a small balance and only a few years left and something happens and you can’t pay, guess what your lender will say.

    If a bank has a lein on two identical $200,000 properties with two identical borrowers and borrower A owes $190,000 and borrower B owes $90,000, they both worked for the same company and both recently got fired and can’t make their loan payment. What do you think the bank will do.

    Who will they want to foreclose on, and who will they want to work something out with. They guy that still owes $190K is in a better negotiating position, because the bank carries all the risk.

  10. Craig says:

    It’s difficult to balance the two, especially at a younger age when the short term and “fun” is all that matters. I am in the mix between short term and long term financial goals and seems to get mixed in with friends who share different mentalities. I love travel, and fun and try to budget for those while still saving for long term, although difficult and tough with a lower salary. Everyone needs their own system.

  11. What a well-written article, Trent. I thought the post was leading up to something big–like, a new direction for TSD blog–but I guess not.

    As for trying to focus on the long-term, I think part of it is just training ourselves to get accustomed to something that is not normal. For example, there are people who were brought up eating minimal junk food who, as adults, find over-processed foods distasteful, not guilty pleasures. If we can train ourselves to get used to doing free activities for fun, eating more healthy foods, etc, then doing what’s good in the long run will be as instinctive as doing what we want right now.

  12. Dan says:

    To quote dispair.com, Procrastination: Hard work pays off over time but laziness always pays off now.

    See http://www.despair.com/proc24x30pri.html.

    (I think you would get a kick out of the black humor on that whole site).

    @Bev – Renting is more of a fixed cost than home ownership. When you have to replace the A/C or roof “out of the blue”, how fixed is home ownership? At least, when I rent (when I have no money), I know what my total liability will be over the course of a lease. As a home owner, I don’t. I could have bought the money pit and not even realized it.

    Yes, one is an investment and one isn’t but one has A LOT more stress than the other too. At some stages of your life, it would be better to rent (in the short term) to buy a house (in the long term) rather than buy a house now (see sub prime mortgage scam) because it is always a better buy.

    @Michael -That is why emergency fund is the better way to go because you keep yourself liquid as oppose to tying all you cash up in an asset that takes a while to liquidate if you need it.

    @ Troy – The bank is not on the hook for the 190k, the signer of the loan is. If they foreclose they will sue for the remainder not cleared by auction. They will still have an asset to move if 190k dude can’t pay and may only be out 10k in the long run (even if dude goes chapter 11).

    While the bank is more vested in the 190k, they probably made the guy get mortgage insurance since he didn’t put down 20% down payment. Not an apples to apples scenario. The bank will probably work more with the 90k dude because he has shown himself to be a better borrower since he has given the bank more over time and might in long run be out less. I don’t follow your logic about the bank having the risk. If your point was simply, keep yourself liquid (which I agree with), then you might need a better scenario.

  13. JoshuaMichael.net says:

    It’s important to consider the big picture in everything you do. I heard a quote that went something like “what you do today will define who you are in 15 years.”

    It’s easy to make the right choices if I consider their future implications.

  14. Makes a lot of sense, but I try to aim for a bit of both.

    For example: My newest car and my Roth IRA. I really can’t afford to pay towards both. I want to pay off the car, but I want to invest in my IRA.

    My compromise? Telling myself that it’ll be OK if I don’t contribute the $1,000 I wanted to this year to my IRA. If I can make it to $500 or $750, that’s more than most other 21 year olds out there, and it’ll still be money I’m glad I saved. On the other hand, I can throw a lot of money at the car, pay off my loan and build my credit, plus have an awesome project for my husband and me to work on.

    Guess I ought to note that I’m okay with lower Roth IRA contributions because of my 401(k) contributions that I started this year. 4%, matched by my company dollar-for-dollar with immediate vesting. Means I ought to be pretty close to on track with the $1k retirement contributions, just not in the same account.

    @Craig (#8) — I wholly agree, it’s WAY more difficult to know what you should be doing but to never have enough dollars to do it all! I only hope that I can make some really good choices when I start to make more money than I am now.

  15. Pizpo says:

    I agree with # 7 Troy. You must keep as much flexibility as possible.

    #8 Craig. As you continue to focus on long term gain, your mind will change about “short term fun.” I have been really focused on long term for about 5 years now and am starting to realize that I do not really value many things that my peers value even though I can now easily afford them.

    Trent: To me, this article is another one where you are integrating finance and health. I like it. Gold cannot buy health.

  16. Damester says:

    The issue is often one of discipline and delayed satisfaction. Things that are rarely taught today in an era of immediate satisfaction and gratification. Instant everything (or almost) or the expectation of it. (Remember the good old days when almost every family saved up for anything they wanted? When you counted and recounted your savings as a kid till you could afford something special and how many times you visited the toy store before a particular item was yours? Ah, anticipation in the best sense.)

    Balance is also important, because we do live in the now and have to be aware of the “right now” but also must be concerned with the future.

    The reason so many people can’t think ahead is because their mental and physical energies are still needed for the literal “daily grind.”

    many people, Trent, are still living a hand to mouth existence these days, even when they want to plan ahead. And the stress and strains of daily life have a lot to do with the “desire” for comfort food. Plus, if you don’t eat healthy, you can’t understand its’ benefits. Forced to eat lots of carbs? It changes your brain chemistry and affects cravings for unhealthy foods. It’s all tied in.

    At best, for these folks, it’s truly stretching the dollars available to them now and trying to upgrade skills and get a better job. Although these days, when people are going back to school in their 40s and 50s to learn new skills in the hope of finding some kind of job…it’s still a struggle.

    I think people need more “in the moment” awareness to focus on the positive aspects of a healthy choice (whether it’s NOT spending money to save it or not eating unhealthy food). Many people get over their infatuation with eating unhealthy food, or too much food, by reminding themselves of how they generally feel afterwards or how they feel when they weigh themselves or when their clothes don’t fit. Things they do every day.

    If you have to dwell on the negative aspects–not having money to pay bills–to keep you from making an unhealthy for you choice, then do it.

    Awareness, mindfulness in the moment always help.
    Really think about what you want, and why. Too much of our lives is habit and acting without thinking. The brain is desensitized as it were.

    Asking people to think five years ahead…nah, most people can’t and won’t. it’s too unreal to most.

    Ask them just to think about how they’ll feel very soon. Because when you make bad choices daily (food intake, spending habits, activity choices), you DO generally have a negative correlation much sooner in real life. Your clothes don’t fit, you can’t afford to pay bills or do things you want, you feel miserable after spending time with people you don’t want to, you beat yourself up for wasting time better spent on earning income, etc.

    Of course, some people have no real sense that what they do is harmful or don’t care. But that’s another story.

  17. Gwen says:

    Trent, I think this cuts to the core of a lot of negative behaviors that we keep doing even though we all know the behavior is destructive. You highlighted some thought exercises that you can do at the end of the post to help us value longer-term investments over short-term gains. I would be **very interested** in a post expanding on that idea. What are some other psychological tricks we can play on ourselves to help us resist just doing what feels good here and now?

  18. Rosa says:

    @Michael #6 – it’s totally possible for rent to be cheaper for you than a mortgage would be for you.

    The landlord’s mortgage may be less than yours because the landlord bought in the past when prices were lower, or because the landlord gets a lower interest rate than you do or financed with cash.

    Or the market may be pushing the landlord to charge less than the mortgage.

    Or the rental market in your area may be aimed at a low-income demographic while the homes for sale market is aimed at higher-income people and the houses are all bigger/fancier than you need.

    It’s really a local, individual problem and not an issue where one is always better than the other.

  19. Trent, I think you’re getting down to the very mechanics of a bad habit. We gravitate toward the path of least resistance, so we select fast and easy without even much thought.

    Unfortunately, that’s our “default setting”; it’s what we’ll always chose to unless we conciously resist. And that’s not easy either, so we don’t do that without strong resolve.

    Your idea to ask how we’ll feel about a certain action in five years is a good step, and we probably all could do with figuring out what mental steps we need to make better choices. On the surface it SHOULD be easy, but what we’re really doing is trying to override our internal programing.

  20. Kevin M says:

    Nice write up Trent. Like Frugal New Yorker, I thought you were leading up to something long-term for TSD. It’s always a good time to step back and look at the big picture – whether it be your life, relationships or career. Thanks for the reminder.

  21. Jackie says:

    #13 Rosa is correct with my experience, at least in the current housing situation. I’ve explored the idea of renting out my house and moving to a cheap apartment. The rentals in my neighborhood are renting at about $400 less than my mortgage payments. Many of those landlords are loosing money every month, but can’t sell because the houses are worth less than are owed on them. Others are doing OK because they’ve owned the houses since before housing prices went to the sky.

  22. Michael says:

    Rosa and Jackie, I guess this is a bad time for me to generalize like that. My market never saw a big run-up or a crash, so rents stayed higher. (The possibility that the mortgaged homes are nicer is, again, not comparing equivalent houses.)

  23. Rosa says:

    Even without a big runup, if your landlord inherited the house her parents lived in, or bought in 1970, prices are higher now.

    And the equivalency thing is hard, because a lot of times you just can’t buy the house you want in the are you want/need. I know a number of people who would really *like* a smaller house but the area they wanted was all new construction, which tends to be gigantic. I would like a newer house, but it’s just not possible in our neighborhood (or, it is possible but it’s not really comparable because we would have to buy an older house just to knock it down, and and count all of that in the cost of the new house.)

    It’s not like most products, where you are pretty much choosing the product – a huge part of housing cost is just location.

  24. Brendan says:


    Be careful about that strategy. If your new landlord is foreclosed, it can be quite inconvenient to you.

  25. Thanks for the post Trent. It was a good point, and so apropos for me right now. I’m training for a triathlon to fundraise for leukemia and lymphoma research, and I struggle to get the motivation to work out, especially when work is as gruelling as it has been lately. I have to put down the great mind-relaxing book and uncurl myself from the sofa and exercise, which just is never as fun as the sofa and book! You’re right, though, the long-term benefits always require short-term trade-offs.

  26. Suzanne says:

    I liked this part “Spend a day thinking about what this activity will be worth to you in five years.”

    I also liked Damester’s idea (#11) “Ask them just to think about how they’ll feel very soon. Because when you make bad choices daily (food intake, spending habits, activity choices), you DO generally have a negative correlation much sooner in real life. Your clothes don’t fit, you can’t afford to pay bills or do things you want, you feel miserable after spending time with people you don’t want to, you beat yourself up for wasting time better spent on earning income, etc.”

    Great post that definitely has me thinking. Thank you.

  27. Matt says:

    This post falls in line with a recent book I discovered called Don’t Eat The Marshmellow… Yet! by Joachim de Posada. It’s a parable that describes what can happen if you take the short term immediate rewards over delayed gratification for a long term favorable result.

    Every day we face choices where we can have the fast fix or we can go for the slow burn. It’s tougher for people to visualize what will happen five years from now versus experiencing what will happen five minutes from now. My wife and I are teaching our children about tough decisions currently when it comes to where our money goes- as we will be cutting down on our cable access and eating at home more to place money in areas we believe are most important (emergency fund, paying down debt).

    Excellent post Trent, keep up the great work and making people think.

  28. Lenore says:

    Tangent time! About the junk food… Baked Lays and Baked Ruffles used to cost the same as regular Lays and Ruffles. Today I noticed they’re $1 more per bag with no extra ounces or improvements. Frito-Lay is obviously betting that health-conscious consumers are willing to pay more, but why should we have to? When major food manufacturers make decisions like this, they directly fuel the obesity epidemic.

  29. Claudia says:

    Baked Lays and Baked Ruffles have a little less fat, but nearly as many calories. So, healthier for you? Just Barely.

  30. Eli Sarver says:

    Also, on renting vs. buying: Roofs, windows, air conditioning units, appliances, new carpet, new paint, new fixtures, association dues, et cetera.

    Rent may go up, but the factors outside of the rent-vs-buy dichotomy do add up.

  31. deRuiter says:

    The problem with trying to save up the entire amount to pay off a house is that interest rates are minimal, and the government taxes you on the interest you earn. Paying extra on your mortgage each month brings down the length of the mortgage, and the amount of interest to be repaid. During the first third of the mortgage term, the amount you save on interest is dramatic. If you own a house and are having difficulties paying the mortgage, you can be creative and wring money FROM the house: Move out of one or two bedrooms and rent them. Empty the garage, sell the junk at a yard sale, and rent the garage to someone else. Have a yard? Plant a vegetbable garden with yard sale purchased tools. Start a business you can run out of your house while you live there. Rent out the house and move in with relatives. SINCE REAL ESTATE VALUE IS DOWN, GO TO THE TOWN HALL AND HAVE YOUR REAL ESTATE ASSESSMENT LOWERED SO YOUR PROPERTY TAXES GO DOWN. Be creative! As to worrying about getting fired, START A SIDE BUSINESS, OR GET A PART TIME JOB AND BUILD UP A CUSHION OF SAVINGS. Everyone has their own ideas, but for me, prepaying on the mortgage saved thousands of dollars, and years of monthly payments!

  32. Eden Jaeger says:

    Excellent article!

    I imagine my life would be much different if I always looked at the long term when making a decision. For some reason, I never do…I need to figure out how to make that a habit.

  33. Jen says:

    There are very few (if any) processed foods that are good for you… “Baked” or not. YUCK!!! If you have ever seen a commercial for a product, don’t buy it.

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