The Financial Costs of Procrastination

Investing
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By Jeff Stoffer

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My car needs another $2,000 repair. I’ve avoided dealing with it for four months. Nothing against my excellent mechanic, but I’d just rather have that money stay in my bank account as long as it can rather than migrate to hers. It’s a big hit, and, well, it just hurts.

We’ve all been there, asking ourselves, “How much longer can I put this off without incurring even more expense?” It got me to thinking about the cost of procrastination.

I’ve often wondered if people think about financial planning in a similar way. It can be expensive, initially. You could easily spend a couple of thousand dollars or more engaging a financial planning professional. People tend to wait until there’s a dire need before seeking help. It’s not always simply a question of spending the money, either. However, as with my car, the money you put in now may save you a great deal more down the road.

Here are just a couple of examples. Seeing a planner might help you to save more each year toward retirement. What if the planner could find ways to allow you to save an extra $10,000 per year? In 10 years, at a conservative 5% rate of return, you’d be able to add a tidy sum to your retirement account – almost $126,000.

You’d be surprised how often people wait until a year before retirement to get help. Seeing someone 10 years earlier could be a big boon to your nest egg and worth paying a few thousand dollars now.

I recently met with someone who wanted to know what to do with CDs that were maturing. They were five-year CDs she had purchased in 2009. I asked what had happened, although I had a sneaking suspicion. She had been a do-it-yourself investor. Sure enough, she had cashed out of all her mutual funds right near the bottom of the recent bear market.

Had she sought help before doing that, she may have had an investment plan that could have gotten her through the rocky times in the market. She would have had some support and guidance to weather the worries that led her to bail out. Had she stayed in the market, she would be above where she was in 2007. The choices she made, however, locked in her losses and cost her about $100,000.

When facing procrastination in financial matters, there are trade-offs. It is sometimes difficult to make the choices today that will benefit us years from now. We are predisposed to live in the present. Our future selves are not there to point out the value of spending money now that will probably yield big returns in the future.

The costs of procrastination can be quite substantial. If you know, or even suspect, you need help planning your finances, seek it out now. The price you pay may be small when compared to the potential rewards when you retire.