The hidden value of gratitude and your money

The idea of “gratitude” has been around for quite some time.

I don't mean the simple definition of the word. I am talking about the idea that if you recognize, appreciate, develop a practice around gratitude – your life will experience marked improvements.

As I write this, it's mid-March 2020, and we are in the early stages of dealing with the coronavirus. Our kids are home from school for the foreseeable future, we are thankfully still in good health, but we've chosen to isolate ourselves. There are a lot of things to complain about but there's also a lot to celebrate and be grateful for. It's a good time for me to write this post and I hope you not only enjoy it but also find it to be helpful.

What is Gratitude?

If you're unfamiliar, this brief primer from Yale's Center of Emotional Intelligence does a great job of explaining gratitude.

In short, “Gratitude is a state of mind that arises when you affirm a good thing in your life that comes from outside yourself, or when you notice and relish little pleasures.”

To reach this state of mind, you have to develop a practice of finding the good things in life that make you happy because they are so easy to overlook. As you go about your day, it's easy to remember the really good and really bad things in life. A promotion at work or the completion of a major milestone are examples of really good things. Someone cutting you off or getting a flat tire are examples of really bad things. They are both easy to identify and recognize.

But what about when your car starts in the morning or the bus arrives on time? What about when someone holds open the door for you as you enter the building? Or when you kids call you during lunch to say they love you? Or just having your favorite lunch that day.

Those smaller moments where you can practice gratitude are harder to see but they're likely more common. Those are the areas where practicing gratitude really shines.

Why is Gratitude Important?

From the Yale article:
“More than any other personality trait, gratitude is strongly linked to mental health and life satisfaction. Grateful people experience more joy, love, and enthusiasm, and they enjoy protection from destructive emotions like envy, greed, and bitterness. Gratitude also reduces lifetime risk for depression, anxiety, and substance abuse disorders, and it helps people entangled with those and other problems to heal and find closure. It can give you a deep and steadfast trust that goodness exists, even in the face of uncertainty or suffering.”


That seems like a pretty big promise.

Why is it that gratitude can do all of those things?

Is it a bunch of wishy-washy “power of positive thinking” type of magic?

No, it's rooted in several of our biases – which normally is bad, but in this case it quite good.

The Baader-Meinhof Phenomenon

The second car I ever owned was a yellow Toyota Celica. Do you know how many yellow cars are driving around the road? Very few. But when you buy a yellow car, I guarantee you'll see one every day.

There's a name for this – the Baader-Meinhof phenomenon, or the frequency illusion.

There are two parts to this – selective attention and confirmation bias. Selective attention is your brain filtering out the junk you don't need. Did you know you can see your nose? Each eye can see a part of your nose but you rarely “see” it unless you try. That's your brain working to filter our useless information.

Confirmation bias is the tendency to find and remember things that “confirm” our beliefs. Your brain ends up prioritizing the information that matches up with those beliefs. You do this when you buy a car (confirming your choice was a good one because other people made it too!).

And when you do this with gratitude, you start seeing gratitude everywhere. That's a great thing. It will make you a more grateful person.

Gratitude is a Mindset

Have you ever gotten hurt? Of course, you've gotten hurt.

Once you hurt or strain your back, you realize you use those muscles for everything. All you want is for your back to not hurt anymore.

You have a lot of desires but when you're sick, you only have one. You just want to feel better.

When you practice gratitude, you begin to recognize the things that you have rather than the things you don't. One of the four noble truths of Buddhism is that suffering arises from attachment to desires. If you want to limit your suffering, try to recognize what you have rather than what you desire. The more you do it, the more second nature it becomes, the more you see it, and the less suffering you'll have to endure.

Start noticing now.

How Does Gratitude Help Your Finances?

Gratitude is good but this blog is about personal finance. So how does it help your money?

When you feel gratitude, you are better equipped to combat the need for instant gratification.

Yep – gratitude reduces “financial impatience” according to a study out of Northwestern University, UC Riverside, and Harvard Kennedy School published in Psychological Science, a journal for the Association for Psychological Science.

The study started with participants in three groups writing about an event in their past that made them feel grateful, happy, or neutral. Then, they whether they wanted $80 in thirty days or some amount gradually increasing amount right now. The more grateful the person felt, the more likely they'd forgo the cash today.

To get a sense of degree, they changed the amounts you'd get today. If you were happy or neutral, there was a preference for getting the money now while grateful people showed more patience.

If you're grateful, you're less likely to go after things that provide instant gratification. I think this is an intuitive conclusion too.

This next piece will also feel intuitive as well – grateful people are also more generous.

For this, we turn to an article from the Greater Good Magazine from the Greater Good Science Center at UC Berkeley:

My own work has tried to map the relationship between gratitude and altruism in the brain. I am discovering that the neural connection between the two is very deep and that cultivating gratitude may encourage us to feel more generous. We don’t say “thanks” for selfish reasons. Far from it: Gratitude, like giving, might be its own reward.

The article goes into greater detail, but essentially gratitude promotes prosocial behavior, which is behavior that is meant to benefit others.

Being grateful has a positive effect on your finances!

Why Practice Gratitude Now?

You are likely relatively happy, relatively healthy, and relatively wealthy. You have the time to read a blog post written by a legit nobody, you have a computer or phone to read it on, and you can see. If you thought about it, you're probably feeling quite grateful right now!

The value of an emergency fund isn't just to avoid going into debt to pay for emergencies… it's to be able to make decisions from a position of confidence and financial strength, rather than one of panic. When you have the means, many financial problems are simply financial decisions.

If your water heater is about to fail, you can wait until it fails or you can replace it proactively. When you replace it proactively, you can research your options, get multiple quotes, and schedule the replacement at a time that fits your schedule.

If you replace your water heater after it has exploded catastrophically, your options are extremely limited.

If you don't have an emergency fund, you have to go with option two. You don't have the savings to pay for it now.

You can proactively practice gratitude now rather than try to start it when you have a crisis.

How Do I Practice Gratitude?

This is the easiest part! Once you have decided to do it, it's time to build a habit of practicing gratitude.

I won't go into how to develop a habit of anything other than to suggest you read James Clear's How to Build a New Habit (his book, Atomic Habits is great too).

Here are a few ideas on how to practice gratitude:

  • Journaling: Get into the habit of writing into a journal all the things you're grateful for. You can do this in the morning or the evening, though evening may be best since the thoughts will be freshest.
  • Social media: Share it on social media. My blogging friend Emily Guy Birkin shares #OneGoodThing every day. It's as simple as that.
  • Say it out loud: Think about what you're happy about and say it out loud, tell someone if you like or keep it to yourself.

Those are all very basic ways to practice gratitude but they get you into the habit of identifying those moments in your life that you are grateful for. It can be something deep, like when your 2-year-old starts saying “thank you” on her own, or something more temporal, like when someone held open the door for you when you had no free hands.

How will you practice gratitude?

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About Jim Wang

Jim Wang is a forty-something father of four who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools,, everything I use) is Personal Capital, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a few commercial properties and farms in Illinois, Louisiana, and California through AcreTrader.

Recently, he's invested in a few pieces of art on Masterworks too.

>> Read more articles by Jim

Opinions expressed here are the author's alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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  1. Florie Barry says

    Very inspiring Jim! It sure beats all the negative energy we are bombarded with daily. Thanks for the reminder of what we should be grateful for. Yale has a scientific definition of Gratitude, very cool. It helps me to combine the spiritual and the science in my life. Thanks.

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