Stop Putting Off Financial Decisions and Start Making Progress

- Most of the time there’s no harm in procrastination. It’s no big deal if you put off household chores or leave that project at work until the last minute. But procrastination of the financial kind could either make you or break you, depending on how you handle it. Yet, because financial planning decisions aren’t much fun to think about, they are readily postponed, according to Suzanne Olson, author of “I Hate Financial Planning: A Guide for People Who Love Money but Hate Planning.”
“It’s easy to ignore everything from paying bills on time to making savings a priority, but the longer you put it off, the further behind you get,” she says.

And that’s because time equals money. In her book, Olson compares “Alan” who starts investing $100 per month at age 25 with “Carol” who waits until age 45 to start. Both investors earn a steady 8-percent return on their hypothetical investments. When they’re both 65, Alan’s $48,000 has become a sizeable $351,428 nest egg, while Carol’s $24,000 investment has grown to just $59,295.

The scenario, which doesn’t reflect any particular investment or fees and income taxes investors pay, shows that time has the potential to multiply an investment substantially.

The key is to get started and keep adding money over time. “Normal fluctuations in the market may have less of an impact if you can stay invested over many years,” Olson says. And compound interest -- or the interest on the interest that banks pay -- can have an amazing impact when given a chance.

“All procrastinators could write a list of reasons to explain their behavior,” Olson says, “but they never get around to it.” Maybe you think you don’t make enough money, or you don’t know where to start. Perhaps you’re waiting for your partner to handle it. Or you’re confused by what you don’t understand. Maybe you don’t want to be told what to do. “No matter what’s standing in your way, it’s still just an excuse,” Olson says.

She emphasizes that saving and investing aren’t the only things that may suffer if you procrastinate. “By resisting decisions or neglecting to make them, procrastinators can unwittingly put their personal finances in jeopardy in ways that are hard to calculate,” Olson adds. She suggests four basic financial planning areas for procrastinators to consider and decide if it’s time to turn inaction into action:

* Take a serious look at your current debt. Escalating debt can stifle your future plans in most areas of your financial life. To reduce credit card debt, list all your bills, from highest interest rate to lowest. Pay as much as you can on the bill on top, even if it means making minimum payments on the others. Once that card is paid off, hit the next one hard, and so on.

* Review your insurance needs. Failing to have adequate disability income insurance could be devastating if you suddenly find yourself unable to earn an income. “For most people, the ability to earn an income is their biggest asset, yet they don’t make an effort to learn about disability coverage,” Olson says. Also, it’s easy to overlook money savings on auto and homeowners insurance, but you may be able to lower premiums by increasing deductibles or switching insurance companies.

* Check your beneficiary designations on retirement accounts and insurance policies. Life circumstances change, but procrastinators oftentimes forget to update their records. Do you have a will? Neglecting such estate planning basics can leave questions that need to be settled by the courts instead of by surviving family members.

* Finally, save money. Direct deposit can make saving a painless exercise--even a few dollars each paycheck can add up. “It’s easier to increase the amount you save once you see your good habit growing in your bank account,” Olson says.

“The best part is that there’s never a wrong time to stop procrastinating and start making progress,” Olson says. “That means the ‘it’s-too-late-so-I’ll-skip-it’ excuse won’t work when it comes to financial matters.”