The Cost of Procrastination

We may have something in common, it's a Saturday you are tired from the work you've done all week. You are just relaxing in your living room in front of your TV and you see a notification pop up saying you've missed paying your credit card bill & your heart begins to sink thinking about the added interest payment on it?

You've experienced one of the costs of procrastination. Procrastination can cause missed deadlines, missed opportunities, and just plain missing out.

Procrastination is avoiding a task that needs to be done postponing until tomorrow what could be done today. Procrastinators can sabotage themselves. They often put obstacles in their own path. They may choose paths that hurt their performance.

Though Mark Twain famously quipped, "Never put off till tomorrow what you can do the day after tomorrow just as well." We know that procrastination can be detrimental, both in our personal and professional lives. Problems with procrastination in the business world have led to a sizable industry in books, articles, workshops, videos, and other products created to deal with the issue. There are several theories about why people procrastinate, but whatever the psychology behind it, procrastination potentially may cost money particularly when investments and financial decisions are put off.

Putting off investing may put off potential returns.

Let's take up a case between Aryan & Sneha who both invest Rs. 1 Lakh at the same time

Sneha starts investing an additional Rs. 10,000 every year at a 7% rate of return & stops after 10 years. Aryan doesn't invest any amount until the 10th year but starts investing Rs. 10,000 every year from the 10th year. At the end of the 20th year, Aryan & Sneha have invested the same amount but the returns on Sneha's investment is higher because her amount has more time for investment return to the compound.

Most of us do at least a little of it every day. Procrastinate.

We tell ourselves "I'll get to that later" and most of the time we do. But what happens if we don't? What if we procrastinate too long? What are the costs?

We try to convince ourselves that there's the little-to-no cost of procrastination, but there can be significant costs, some very tangible, others more subtle

Financial Planning- Detailed and thorough financial planning is critical to our long-term well- being. When we are in our twenties and thirties, we can't see past the new cellphone that was launched a couple of weeks ago, let alone think about planning for our retirement. Those days just seem too far away, but it's never too early to start planning for our retirement. What's the benefit of starting early? Using the compound interest calculator, I wanted to see how much a relatively small investment could grow over time. If we start with Rs. 5 Lakhs and estimate that I'd put in an additional Rs. 50,000 per year and calculate the growth over 10 years at a 5% interest rate, what would I have at the end of that time period? Rs. 14,43,342. Change it to 20 years and the number becomes Rs. 29,79,947. Amazing what a little planning and discipline could do for our long-term financial wellbeing.

Insurance- After procrastinating on taking up a term insurance plan, one of my clients did a comprehensive analysis of her insurance needs. After extensive research, she found a good insurance plan with a lesser cost for her desired coverage. She also found out that if she had gone for the process a few years earlier she would have saved several thousand rupees or could have gotten a large coverage. She was also upset as she could have done a lot with that extra premium she was paying. The same goes for renewing any kind of insurance: auto, home, personal liability, health, etc. Another one of my clients missed the renewal of her auto insurance & only had renewed it a couple of months later. Can you imagine the cost had there been an accident with that vehicle?

WILL - Not that any of us want to think about it, but at some point, our earthly possessions will need to be passed on to someone else. It's true, as cool as our stuff is, we can't take it with us. Wouldn't it be fantastic if we had some say in where our cool stuff went? Well, that's what wills are for. In India, not many people have a will in place. None of us want to think about death and dying, but it is irresponsible to our loved ones not to take care of this important process.

Taxes- We always wait until the last minute to file our taxes, it's not that we do not want to file our taxes, but we generally try to delay the inevitable. If we thought, we were getting a refund we would be on our toes for filing our taxes as early as possible right? Not necessarily. Procrastinators are procrastinators, and whether we think we are getting money back or having to give money, we generally wait until the last minute to do it anyway. In addition, the extra penalty for filing our late returns, the stress of not knowing takes a tremendous toll on our mental health

Fortunately, procrastination can be managed. It requires scheduling, initiative, and a drive to do better, but it can be done.

The best way to stop procrastinating. Just get started. Starting small will provide the momentum to finish. Unfinished tasks are uncomfortable for us. Once we get started, we have the drive to finish.

The writer is a Wealth Adviser in Mitraz Financial Services Pvt. Ltd and can be contacted at micontact@mitraz.financial