How a 'Low Time Preference' Made Me a Multimillionaire Ways in which strategically delayed gratification, in life and in business, can pay remarkable dividends.

A 1970 article published in the Journal of Personality and Social Psychology detailed a study in which children were offered the option of getting a treat immediately or waiting 15 minutes and getting two treats. The results, which were replicated in additional studies, revealed, according to a summation in Science magazine, that those children "…who delayed gratification longer … developed into more cognitively and socially competent adolescents, achieving higher scholastic performance and coping better with frustration and stress."

In business (including investing), a similar kind of delayed gratification — known in the economic world as "low time preference" — can also be a unique pathway to profitability.

Even someone with an excellent salary or a healthy company can end up poor if they have a "high time preference," in other words being focused principally on the present. On the other hand, someone from a poor background with a low time preference and the correct training can end up wealthy. People who fail in property or business often have a preference for the former, and therefore give up before they succeed, or succeed and then spend the money they make rather than reinvesting it.

I didn't start out with a lot in life, but having a low time preference allowed me to build a multimillion-pound net worth through UK real estate. Of course, skills are essential in order to do just about anything well, but regardless of your level of expertise, a high time preference will hold you back from true success.

"Fast pound" versus "slow pound"

These common expressions (if you are not in the UK, substitute your currency of choice) refer to two business and investment strategies: one that brings in money now and one that builds your net worth. Ideally, your fast pound should be used to invest into your slow pound structure. This way, over time, you become steadily richer rather than spending money as you earn it.

An example of this in the property investment world is becoming a deal sourcer (fast pound) — that is to say finding and selling property deals on to other investors and using the money made to invest in your own properties (slow pound).

Essentially, the need is to find an income-producing asset to buy with your earned income, including reinvesting it into growing a business. I find it most helpful to form a slow pound strategy even before you are making any money, but as you do, put it aside and make it ready to invest.

Related: 3 Lessons I Learned by Helping My Employee Become Financially Free

Buy luxuries with passive income

When you start out, you will probably need to buy any essentials with fast pound income, but it's vital to pay for any luxuries using passive income generated by your slow pound strategy. This is something businessman and author Robert Kiyosaki teaches in his 2017 book, Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!. Learning this lesson helped me grow my property portfolio to the size it is today. It allows you to free up earned income to invest by reducing your time preference with reference to luxuries.

One example of this principle is my house: My wife and I bought our £3,000,000 home with passive income (we rented for years before that) because I classify a home as a luxury — paid for with capital that you could have invested in income-producing assets. I always advise that people only buy a home if it's a luxury they really want to splash out on, and only once you have the slow pound income to do so.

So, if you want a luxury item, whether a car, an expensive holiday or a home, wait until you can afford it with your passive income (i.e. your slow pound). This is one key to building wealth that's too often overlooked in education systems. In school, they usually describe the making of money as the product of a job rather than a business, but after that don't instruct students what to do with that money; the answer is kept as a secret that the rich teach their own children, but which never gets out to the masses. One of the things I decided early on in my career was that once I made it, I would speak about how I did it, and that remains an important part of what I do to this day.

Related: 5 Steps to Buying Your First U.K. Investment Property

Hold assets for the long term

Everyone knows that you are meant to buy low and sell high, yet most wind up buying high and selling low. When the market sentiment is that everything is going up forever, everyone wants to buy. Once it looks like prices could drop forever, everyone wants to sell. The trick then is to buy something that will produce a good income regardless of market prices. If you do this, you can hold the asset through a downturn without worrying about its price.

In real estate, this means buying a property that produces a dependable rental income. Rents are normally less affected by property market downturns than house prices, and if you have a good cash-flowing property, you can keep it through long periods of market turmoil. Once the market rebounds, you can then refinance or sell the property and use that money to reinvest. (Refinancing normally makes more sense, as you keep the cashflow from the original property and often avoid having to pay tax on the sale.)

Lowering your time preference is a pivotal step toward success in any venture in life. If you can do this, you are on a firm footing for creating generational wealth for you and your loved ones.