As a financial adviser, I have had the privilege of sitting with real people and hearing their unique stories for over 15 years. I have heard the financial stories of about 4,000 people during that time. My clients come from all walks of life and convey to me things they may never discuss with anybody else. What’s one issue that comes up regularly, across the board? Procrastination.
How can we get people to recognize the corrosive impact of procrastination? The following are some symptoms and suggested remedies to alleviate them and actively work against procrastination.
The arc of professional life has provided me some perspective on the human psyche and how and why people do what they do. To say it has been fascinating would be an understatement. Based on my observations, here are a few key points I have learned. These points are simple, common sense steeped in real life and from real people.
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Procrastination Symptom #1: I’m in No Rush
“I have years until I have to make that decision.”
Remedy:
You have time, but it often doesn’t come in the form of years. Any decision deserves thoughtful processing, but decisions can and should be made over the course of days or weeks, not months or years. Pick a reasonable deadline to commit yourself to act on choices put in front of you. If you feel pressured into a financial decision, back away and approach it with a different person or from a different angle.
Procrastination Symptom #2: Backward Priorities
“I will eliminate debt and then get ready for retirement.”
Remedy:
In these times of extraordinarily low interest rates, embrace the “good” debt and avoid the “bad” debt. Debt is like cholesterol — there are good and bad parts. Embrace 30-year mortgages in your 20s, 30s and 40s, and consider an eight-, 12- or 15-year mortgage in your 50s and 60s. All too often, I have seen people proudly debt free in their early 50s but woefully behind in retirement savings. Your house will be able to supply $0 of your retirement income, and starting to save for retirement in your 50s also results in missing the most crucial element of retirement planning: time.
Procrastination Symptom #3: Someday Syndrome
“I invest conservatively because I don’t want to lose money. Maybe someday I’ll be more comfortable with adding risk.”
Remedy:
If you aren’t comfortable with risk in your younger years, get so! If you can’t, you’ll have to save three to four times more, which is likely impossible. Most of us, at some time, will need to make decisions that require blind faith and trust – however difficult that can be at times – accepting the risk to get a commensurate reward. The properly allocated, patient investor can have a reasonable expectation of a 5%-6% return over the long run.
Procrastination Symptom #4: Spend Now, Save Later
“I love it when I get a raise, promotion or retire a debt! My cash flows are suddenly better!”
Remedy:
Every time you see an improvement in cash flow, sit down with rigor and discipline and answer this question: What shall I do with the extra cash flow each month? If you get a raise of 3%, perhaps it’s an opportunity to increase your retirement plan contribution by 1%. You get a new job and a 10% raise; increase your retirement contribution 4%. You retire an auto loan of $300 month; start adding that $300 a month to your savings to build up a down payment for the next vehicle purchase. Improved cash flow without applying this discipline is like a glass of red wine to the financial bloodstream. Before you know it, your lifestyle has adapted to the increased cash flow and it’s more difficult to make a change.
Procrastination Symptom #5: Counting on Mom and Dad
“I’ll inherit money that will provide for me in retirement.”
Remedy:
I advise clients to generally dismiss possible inheritances. If it indeed comes through, great. But many a tidy nest egg has been decimated by long-term care expenses. An 80-year-old patient admitted to the dementia unit of a skilled care facility could go through a $1 million portfolio in as little as six to 10 years.
Procrastination Symptom #6: Partner Problems
“My partner is a ‘live for the day’ person, and I can’t get them to buy into long-term planning.”
Remedy:
This is very common and a challenging dynamic. Get on them and stay on them. Your future can be dependent upon them, and an unwillingness to participate in the process reduces your long-term chances. I like to show people who are resistant or ambivalent, how much they can save over the next 10, 20 or 40 years with even modest contributions and moderate risk. For example, if a 25-year-old adds $6,000 to a Roth IRA every year for 40 years and earns 7%, they could have almost $1.5 million at age 65. That raises some serious incentives to taking saving more seriously. These “time value” calculators are all over the web.
If nothing works, you have no alternative but to shoulder the responsibility yourself. That can be stressful and lonely, and possibly impossible if the partner is a big spender as well.
In conclusion, the most important asset we all have is time. Every day, that asset dwindles on us. Morbid? Yes. But a fact. I work with clients in their 50s who have done what they needed to do from their 20s and show up to my office wide-eyed at what they have built over time. They didn’t have to make a lot of money. It’s all relative.
People of any means can build six-figure retirement accounts with relative ease if:
- They apply rigor and discipline.
- They don’t procrastinate.
- They can accept a reasonable amount of risk.
Start by saving a minimum of 5% to retirement accounts and increase that with discipline 1%-3% each year. If you must pull back for life event reasons, do so, but get back on that crucial cycle when circumstances allow.
I wish you well on this journey.
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