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Procrastination

Peter Ellen Nexus

...And why it is important to your financial well-being.

January 20, 2013 2:53 by



What is procrastination?

Procrastination is where you put off taking an action in spite of being aware that prompt action would be better.

We all procrastinate. It’s why we have lists of chores to do around the house; why we don’t clear out the garage; why children don’t do their homework; why I’ve left writing this article until the last minute.

Why do we procrastinate?

In a nutshell it is ‘hyperbolic discounting’, which means that the immediate costs and benefits of a decision appear unduly vivid in comparison to the future costs and benefits. We exaggerate the present; we diminish the future.  We postpone an unpleasant task until tomorrow in favour of a pleasant one today. We fail to anticipate that tomorrow we will find another excuse to postpone it again.

Why is procrastination important to your financial well-being?

There are three main concerns. First, our urge for instant gratification leads us to make financial decisions and take financial actions that are definitely not in our long-term financial best interests. For example, we spend on credit cards to purchase something NOW, but we then suffer an interest rate close to 20% as the consequence

Secondly, we want to avoid emotional distress so we avoid financial decision making altogether, on the basis it will be painful. We know we should…but we put it off till later.

And, thirdly, we don’t want to think of ourselves negatively, which compounds the problem. We suffer cumulative procrastination! We redefine our life position… “I really don’t want to get my finances in order because it would interfere with my ability to live in the present”. We don’t want to admit our mistakes, even to ourselves.

What can’t you do about it?

There are several solutions that won’t work – here are two. Having more information will not solve the problem. We are quite likely to put off gathering the right information – procrastination again. And, if we do educate ourselves, it is quite likely the information won’t stick. However, there is a chance that information, presented in a vivid and personalised way, at the right time, may work.

Relying on financial institutions is not a good solution, either. Such organisations play to our desire for instant gratification – ATMs provide cash on demand; credit cards allow us to purchase beyond our current wealth; current accounts carry no interest; savings accounts are not automatically linked to current accounts; payday loans are available and roll over. The very institutions we set up to help us save are much more interested in helping us spend.

What can you do?

Learn from your elders and role models. Many pensioners regret not planning well for their retirement; in the UK, over 20% of all pensioners go back to work after retiring.

Procrastination leads to regret.

Try these simple remedies

Talk to a financial adviser who will help you plan and will follow up with you every few months.

Find a limited access savings opportunity, where you can put money in but cannot get it out for a defined period, e.g. a Christmas Club or a Bond

Make a public commitment (at least to your family) about your plans and how you will fund them. Share the commitment.

In Summary

We all suffer from procrastination to some extent – it’s a human foible linked to our over-valuing the immediate at the expense of the future. It leads to us making some poor long-term financial decisions and eventual regret.

To avoid the worst effects of procrastination, you can take some actions that are simple to explain but hard to take. But, to enjoy a long and financially secure old age, you had better start NOW.

 

Peter Ellen is Operations Director at Nexus Insurance Brokers www.nexusadvice.com and has extensive experience in the area of sales management and leadership, sales and sales management development and operations management. He has worked in the industry for 28 years in senior management positions and as a consultant, working with regulators, product providers and distributors. To contact Peter for advice with any insurance and investment advice please email him at [email protected]



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