Here is the Cambridge definition of the word ‘Procrastination’ – To keep delaying something that must be done, often because it is unpleasant or boring. The definition highlights two important aspects – 1. The thing which is being procrastinated is important 2. The thing which is being procrastinated can be boring. Let’s dwell upon financial procrastination. Now the investment decisions can be boring for someone; however, they can be interesting for some other. However; I am sure you would agree that the Financial Decisions are necessarily important for all of us. The fact is; in the list of things which are highly procrastinated; Investment decisions would be among top few.
Which investment decisions are procrastinated:
The investment ‘decision’ or the ‘act’ that are neglected can be seemingly trivial or at times they can be substantially important. Whether the decision/act is important or trivial, the reason given for not deciding or not acting is definitely trivial. Here is a list of tasks / decision avoided or procrastinated. The list is representative
1. Tracking monthly expenses
2. Important investment decisions such as investing for Retirement planning
3. Postponing monthly recurring investments such as SIP
4. Avoiding preparing a ‘Will’
5. Procrastinating a Financial Plan or implementation of a Financial Plan
6. Postponement in buying Risk Cover (Health, Life etc)
7. Organizing the important financial documents
8. Repayment of dues on credit card
What can be the cost of procrastination:
Often, the cost of financial procrastination can be calculated in absolute money terms. However, sometimes it is beyond that. The losses due to avoidance of timely financial decisions can be wastage of time, mental harassment, laggard in achieving social status etc. Here is a list of some specific losses –
• Imagine you haven’t bought a Health Insurance and a family member is hospitalized due to some medical emergency. You would rather liquidate your investments and pay the hospital bills. This can eat out your savings of last 3-4 years and you may have to start saving all over again.
• Delay in regular savings can have a large impact on your assets in the long term. Here is an example of a delay in starting a SIP. Suppose you start a SIP of Rs 10000 per month, the rate of interest is 12% and the investment period is 20 years – the total amount accumulated at the end of 20 years will be 98,33,075. However, in case you delay this SIP by 8 months then the with all equations remaining same the amount accumulated will be Rs 90,10,450. This means the delay of just 8 months in starting a SIP of Rs 10000 can cost you approx. Rs 8 Lakhs.
• Not buying Term Insurance or not making a ‘Will’ can have a lot of mental trauma in case the bread earner dies. The family can be in huge financial crises. Not making a ‘Will’ can have an impact of asset distribution to the legal heirs.
• Not getting the Financial Planning done in time can have a substantial impact on the amount required at the time of the goals like education of children or your retirement.
• Simple things not keeping the important documents well organized can cause a lot of time loss.
• You may get in the vicious cycle of exorbitant interest payment in case you do not pay the Credit Card dues in time
This is what you can do to avoid procrastination in financial decisions or the Financial tasks:
• Sometimes procrastination is a habit. Sometimes it is because the decision or the tasks are not attractive enough to be performed immediately. You have to constantly train yourself that the boring decision and tasks are good in the long run. So you have to complete the boring tasks first and then the exciting ones.
• Most of the times the times required of taking these important financial decisions or completing the financial tasks is very small. However, the time spent just on thinking about completing the tasks can be substantially high. Constantly instruct yourself that by spending a small time (in taking an important financial decision or in completing the important financial task) you will get benefited in a big way.
• Celebrate after taking the financial decision or after completing the financial decisions
• Don’t wait for taking any financial decision or completing the task. Instruct yourself the deadline is ‘now’, else you will incur huge losses
• Prepare a Checklist of Important Financial Decisions and Important Financial Tasks. Share this list with your spouse. Both of you together should accomplishment of each task in the list.
Financial Planning is nothing but changing the way of living. By taking a small step you can pave a way towards a bright tomorrow. Do write your feedback in the comments below.