Procrastination is uniquely human. I cannot remember hearing of occurrences in nature when an animal procrastinated. Squirrels, geese, bears don’t wait around to start preparing for winter.
Cynthia Cryder, professor of psychology at Washington Univ. St Louis stated: “Humans are short term focused, so the present looms very large to us. The future feels less vivid and important, so it’s hard for us to prioritize our future selves.” (1)
All of us procrastinate to varying degrees in different situations. Tim Urban’s TED talk “Inside the Mind of a Master Procrastinator” presents an entertaining / humorous 14-minute discussion of the different players in our thought process: 1) Rational Decision Maker; 2) Instant Gratification Money and his guardian angel, the 3) Panic Monster. The Instant Gratification Monkey has no memory of the past or concern for the future and only wants to do things that are fun and easy. The Rational Decision Maker can visualize the future and make long-term plans / decisions. (2)
Putting off tasks we find unpleasant, boring or stressful can usually be harmless, as long as you get around to them eventually. If you procrastinate about tasks with deadlines, the Panic Monster can motivate you to action. But what about procrastinating about things like saving for retirement or exercising. Those have no deadline, unless you call a heart attack due to obesity or want to quit work and have insufficient savings a deadline. Yes, then the Panic Monster can pitch a fit, but it may be too late. British actor and TV personality Christopher Parker summed it up: “Procrastination is like a credit card. It can be a lot of fun until you get the bill.” (1)
Time value of Money. As Dr. Cryder pointed out, the future seems distant and hard to prioritize. Allow me to perhaps bring it more into focus.
Just for fun, let’s pretend you are now age 40 and want to retire at 65. What will your cost of living be at retirement and then later fifteen years into retirement at age 80? You are spending $5,000 per month for living expenses now plus $10,000 per year for a nice vacation. You want to maintain that same lifestyle forever. What will it cost in twenty-five years at retirement if we assume inflation will be 2.5% per year?
Are you ready for the answer? You will need $9,270 per month in twenty-five years to buy what the $5,000 buys now. And the $10,000 vacation will cost you almost $19,000. So merely to maintain your lifestyle you will need almost double the income.
Then fifteen years later….do you really want to know? The same grocery cart that costs you $5,000 at 40 and $9,270 at 65 will cost over $13,000 at age 80.
What if I told you this is no big deal? You can have it covered if you do _____. Would you believe me? Would you take my advice?
It is like the doctor telling you to stop smoking, clean up your diet, limit your alcohol and exercise vigorously daily…. or you will become ill with all sorts of unpleasant conditions and have an unpleasant life in the future. Some people heed the advice and alter their lifestyle immediately while others procrastinate.
Example: If you save $10,000 per year in your 401(k) or other investment plan and increase the amount saved annually by 5% and earn 7% per year on your money. In 25 years, you have over $1M; in thirty years, $1,760,000.
However, if you procrastinate, and only get ten years of savings and start with the same $10k per year, you only accumulate $180,967. Hmmm. $1M or $180k…. which is better?
So, if you have only ten years to save and want the same $1M, you will need to begin saving $60,000 per year and increase that by five percent per year as well as earn 7%.
There is a big difference between working hard and working smart. Hard is good. Smart is usually better. Combine the two and good things happen.
Procrastination and market timing, in my opinion, are a bad combination. Would you all agree that real estate prices have gone up a great deal in the last couple of years? And that the stock market indices are trading at all time high levels? Now for the question: Is that a rational reason not to buy a home now to live in? Or keep cash in the bank waiting for markets to drop?
In my opinion, No.
Are you paying rent now for a place to live? How does the rent compare to your mortgage payment? How long are you going to live in the house? While you hope the home will appreciate and you can one day sell it for a profit, it is first and foremost a place to live. An alternative to living in your car or renting. If you own, you are paying down your mortgage and not your landlord’s. And someday, when you do sell, more likely than not, the cash proceeds merely go into the next house, so it is still not really an investment…but a place to live.
Sitting in cash waiting for the stock market to crash can be a very expensive form of procrastination. Never, ever, interrupt the compounding.
Example: Over the past fifty years, the S&P 500 has appreciated 7.8% per year and if you reinvested dividends 10.9% per year. During that time frame, the S&P had ten years with negative returns. Back-to-back losses occurred in ’73 & ’74 and also in 2000, ’01 & ’02. The last time the S&P lost money was in 2018 when it was down 4.4%. In fifty years, forty are positive and ten were negative. Four of five years you made money. What are the chances of “guessing” when the negative years will occur? (3,4)
The key to success is time in the market…. not timing the market. Bottom line, stop procrastinating. Know how much money you need to fund your financial priorities. Explore your financial reality. Is it different from the narrative playing in your head? Stop hoping for a miracle. Start now to create your financial roadmap.
Wollman Wealth Designs, Inc is a financial planning and investment advisory firm in Escondido, CA. We partner with clients around the country and locally, to create wealth accumulation plans as well as cash flow spending plans for retirement. Your finances are personal and planning for them should also be personal.
Securities and advisory services are offered through Cetera Advisor Networks LLC (doing insurance business in CA as CFGAN Insurance Agency LLC), member FINRA/SIPC, a broker-dealer and registered investment adviser. Cetera is under separate ownership from any other name entity. CA Insurance License #0604093