Financial procrastination is the deferral of making necessary financial decisions. It is putting off a financial decision, even though you know that you might be worse off as a result. Typical examples are failing to cash checks that are signed to you, depositing money in your savings account, or paying bills on time. While the types of financial procrastination tend to vary, the results are always the same - the costs tend to be substantial and long-lasting.
Costs of Financial Procrastination
If you are not careful, then financial procrastination can happen to you. The following four costs are often the result of financial procrastination.
- Delays in investing - All too often individuals think that they can delay investing without having any dire consequences. Unfortunately, this is false thinking. For example, Adam decides to invest $10,000 in an account that earns a six percent of return each year. After ten years he stops making deposits. Jane decides to financially procrastinate for ten years; at which point she beings to invest $10,000 into an account that also earns a 6 person return each year. Both Jane and Adam will have invested $100,000 after ten years. However, Adam's balance will be significantly higher after a 20 year period because his account has had more time for the investment returns to compound.
- Delaying routine investment decisions - Financial experts know that "perfect market timing" is a myth. Putting off crucial investment decisions until the market "improves" can cost thousands of dollars over time. However, that is not to say that hasty financial decisions should be made. Instead of procrastinating on investment decisions, individuals should spend time with a financial advisor to determine what investments are best for their financial needs and goals.
- Inability to organize personal finances - Financial procrastination can have a cost on your personal finances. Once you get in the habit of delaying important financial decisions, you will suddenly find yourself forgetting to pay bills on-time, waiting too long to cash checks, or failing to capitalize on the appropriate credit offerings. Procrastination is a bad habit that can all too easily take over your personal finances.
- Delaying major financial decisions - When you procrastinate for too long, you might be tempted to make hasty financial decisions. These decisions can be made without adequate research, reading the "fine print" in contracts, or not having adequate insurance coverage or assets at a time of need. Don't let financial procrastination push you towards poor financial decisions.
Simple Steps to Avoiding Procrastination
Avoiding the costs of financial procrastination will require you to be diligent about your financial decisions. In time, and with the help of the following steps, you can teach yourself healthy financial habits.
- Accept that you might never "feel ready" about a financial decision. Trust in your research, advisors, and ability to make sound choices.
- Commit to five minutes of planning each day.
- Make all deadlines equally important. Don't let a deadline slip past your notice.
- Make your big goals into bite-sized milestones that are easier to achieve.
These four simple steps can go a long way towards helping you to achieve financial independence that is based on sound money decisions and not financial procrastination. As Mark Twain famously stated, "Never put off till tomorrow what you can do the day after tomorrow." Financial procrastination can and should be addressed immediately.