Financial Procrastination

How It Hurts and How to Avoid Putting Off Getting Your Financial House in Order

Dan Crimmins
Financial Adviser in Woodcliff Lake, NJ

Financial Planning Investing & Retiring

Financial Procrastination
February 13, 2016

The old saying about procrastination goes, "Never put off until tomorrow what you can do today." When you consider financial procrastination, it can be even worse – because sometimes there is no tomorrow. Whether it is saving for your retirement or preparing financial arrangements for after your death, procrastination can thwart your financial wishes and harm those dear to you.

The main way procrastination harms you financially can be summed up in two words: compound interest. The impact can be startling.

For example, let's say you invest $1,000 per month in an investment paying 5% annual interest. After 10 years of contributions, you will have invested $120,000 in principal and earned $36,576.30 in interest for a total of $157,576.30. If you had invested that ten years earlier and stopped making contributions on it at the ten-year mark, you would have invested the same $120,000 but earned an extra $101.953.36 in interest without making any contributions over the next ten years. Your total would be $259,529.66.

Are you convinced? You should be. Let's assume that you are, and that you take the following actions.

  • Make a Plan and Do It Now – People can tend to get overwhelmed by situations as they arise and make snap judgments that may not be the best long-term choice. However, if you make a plan, you will feel a greater sense of control over events, and are more likely to make correct decisions.

    Estimate the amounts you will need for specific goals in your life – home purchase, retirement, tuition, or whatever applies to your situation – and determine how much money you will need to save over time to reach those goals. There are many online resources available to assist you, and do not hesitate to seek professional advice if you need it.

    Do NOT use the lack of a plan as an excuse to procrastinate further until your plan is in place. Make your plan now. Even if you find the thought of it unpleasant, you owe it to your family and loved ones to do it. Besides, you will experience a great feeling of relief and accomplishment when you finish your plan.
  • Make Saving for the Future a Priority – Treat future savings as if they were immediate bills needing payment, just like utility and mortgage payments. Anytime you can make the process automatic, such as a direct deposit in a 401(k) account, do so. You will adjust to the altered amount in your take-home pay over time, and will eventually forget about it – until you get those pleasant statements showing how your savings are working toward your goals. If you don’t prioritize saving for the future, you might end up like the comedian Jackie Mason, who said, “I have enough money to last me the rest of my life, unless I buy something.”
  • Make Inheritance Plans – It is always unpleasant to think about death, but it is important to make sure your family is taken care of in case of your passing. The mere act of thinking about the financial arrangements after your death may lead you to decide that another path is preferred (referring to finances, not death – but if you find an alternative to that, please let us know).

    For example, you may decide that a living trust works better for your financial situation, or you may decide long-term care insurance may be a better use of your money later in life compared to securing a term life insurance policy.

The key is that you are thinking about the future, and taking actions now to achieve your future goals, whatever they may be. Don't wait any longer – make your plans and take action now. Don't even bother to finish this sentence… hey, why are you still here? Go!

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