Procrastinating on our financial planning and decision-making can have a real cost.
The following article originally appeared in my weekly Globe and Mail column.
Many people put off creating a financial plan for a myriad of reasons. Most people are waiting for something: a comfort level, the fear of making the wrong move, a certainty, divine intervention or just an inability to decide.
However, the costs add up while you are waiting to make a financial decision. Here are three examples:
1) Insurance decisions: The older you are, the greater the cost of annual premiums. The older you are, the greater the chance of getting an illness that might make you uninsurable.
2) Setting up a will: Families might delay this because they cannot decide on custody of the children or assets. However, procrastination can put families in a position where the courts and Family Law will have to decide on the caregiver, and others will determine how your assets are split.
3) When to start investing again: There is definitely a timing component to investing. But the one thing we can be sure of is that while there have been ups and downs for investors, since the 1950s, stocks have always outperformed 90-day T-bills, on a decade by decade basis. Today, we have some of the lowest T-bill rates. The odds are above average that being invested in the markets is better than cash. If we can agree on this, then on average, procrastinating on investing will hurt your wealth.
Here are two key steps to minimizing financial procrastination:
A) Before you go into a financial discussion or decision, make a list of what you would need to know to feel comfortable making a decision.What is it that you are hoping to get from this decision? What is the downside risk of making the wrong decision, and how can you decrease the chance of this downside happening?
B) Using the list as your guideline, ask the questions needed and take the time to get the list complete. Not all answers will be black and white. There will be some more emotional “gut check” items on the list that you need to get a degree of comfort with. Once this list is complete, it is time to act.
If you are sitting on a financial decision today, understand that there is likely a real cost to putting it off. The time to make the decision is now!
Watch this short video here on how a good financial planner can help you with your personal financial decisions.