Procrastinating Personal Finances

by Ace on July 16, 2010

You ever have something that you “know needs to get done,” but the task never makes it way off your to-do list? What about something that specifically had something to do with personal finance? Are there things that you mean to do (start saving for retirement, start an emergency fund, pay down debt) but somehow days, weeks, months slip by and no progress is made? Welcome to the world of procrastination. Unfortunately, when it comes to personal finances, procrastination can have devastating effects on your ability to grow wealth. So rather than letting those little demons control your life, fight back. Let’s look at some of the causes of procrastination and how you can overcome them.

How Common Could It Be?

Almost 20% of people consider themselves to be chronic procrastinators. This doesn’t include casual procrastinators. Some studies with students have shown that almost 85-95% of all students procrastinate. I know I fell victim to procrastination during college. Even today there are things that I procrastinate. For example, I’ve been meaning to close a Chase checking account for a few months now. I only have 90ish dollars sitting in the account, but this is money I could be using to pay down my student loans!

Causes of Procrastination

There are many potential causes of procrastination. Here are common reasons why people procrastinate with their personal finances.

You fear failure. Fear of failure can be absolutely paralyzing. Things like managing your retirement when you’re young can be incredibly overwhelming. The thought of having to plan for something that may be as much as 40 years away is enough to invoke fear in many people. But mistakes are your friend, because you will have an opportunity to learn. It’s much better to make these mistakes while you’re still young and have the opportunity to recover from them.
You can’t decide. Similar to the fear of failure, having too many choices can lead to complete inaction. Intuitively we believe that having more choices is a good thing. But in many cases, having too many choices makes it impossible for us to make a rational decision, and as a result we don’t do anything. Here’s what Physorg.com has to say about it:

Researchers from several universities have determined that even though humans’ ability to weigh choices is remarkably advantageous, it can also come with some serious liabilities. People faced with numerous choices, whether good or bad, find it difficult to stay focused enough to complete projects, handle daily tasks or even take their medicine.

Similar to the fear of failure it’s important to remember that mistakes are part of the process. As long as you make corrections, then in many cases doing something is better than doing nothing.
You strive for perfection, when good is good enough. From the personal finance point of view, this could be like trying to make the perfect investment choice before ever investing. Unless you start doing things, you’ll never get anywhere. And in many cases good is good enough. Rather than waiting for the “perfect opportunity” to fall into your lap, make decisions that are good enough, and modify them as you see necessary.

Effects of Procrastination

The effects of procrastination stretch beyond the obvious fact that you’re not getting things done. Procrastination can be detrimental to your health. Living in a constant state of stress and anxiety can lead to many health problems. Here is what an article at Psychology Today had to say:

Just over the course of a single academic term, procrastinating college students had such evidence of compromised immune systems as more colds and flu, more gastrointestinal problems. And they had insomnia.

Another problem is that you could be wasting time. Wasting time can be one of the worst things you do to your personal finances. Imagine that there are two people, Bob and Mary. Mary recognizes that saving for retirement at a young age is really important so she starts saving when she’s in her early thirties. She puts $200 a month towards her retirement and does so for the next 30 years. Bob on the other hand procrastinates his retirement savings, and waits until he’s in his forties. But he realizes that he needs to catch up so he starts saving $400 a month for the next 20 years. For those of you keeping track Mary will contribute a total of $72,000 over the thirty years. Bob will contribute $96,000, so $24,000 more than Mary. Assuming that both receive an average of 6% each year, who ends up on top? Well many of you already know how this story plays out. Mary ends up with almost $202,000, whereas Bob has under $186,000. This makes for a total difference of $40,000!

Ways to Fight Procrastination

Here are six steps to battle procrastination.

Make a list of the things you need to do. Make sure that you only put things on the list that you really intend to do. Also don’t waste time trying to think of every little thing that needs to get done, you can always go back to your list later and add or remove items as you see fit.
Break each task into smaller actionable steps. Make sure they are actionable. “Start retirement” isn’t good enough. Break it down into steps like, “Go to my company’s 401(k) website and find a phone number to call.” etc. When you read the step you shouldn’t need to think about what to do.
Give yourself deadlines. Make deadlines of when you’re going to complete each task by. Don’t be unrealistic! If you create unrealistic deadlines, then you’ll give up and fall back to square one!
Create Focus. This is really key when it comes to avoiding procrastination. Create barriers that will make it difficult for you to procrastinate. If you find yourself constantly checking e-mail or reading online, disconnect yourself from the internet. This could be as simple as turning off your WiFi, or maybe as drastic as unplugging your cable modem until you’re done. The key is to create a situation where doing the work is the least troublesome thing to do. Another trick I like is to use a timer. If there’s something that I find myself dawdling to complete, I set up a timer and I race myself. I find that this normally instantly gives me the focus I need to complete the task.
Keep track of your progress. Check back with your list of steps to make sure that you’re making progress. Don’t constantly push back your deadlines if you’re failing to meet them. Either you set up unrealistic expectations, or you’re still procrastinating! Whichever it is be honest with yourself, and adjust appropriately.
Take breaks and reward yourself. Whenever you finish a task, it’s important to remember to come up for air. This will help you clear your mind for your next task.