Why procrastinating is likely costing you thousands of dollars
For years after getting my first job, I had no idea how to handle my superannuation.
Switching jobs over the years meant I ended up with a few different super funds. Some were whittled away to nothing by fees. Others were just left in the ‘default’ investment option since I didn’t know any better.
But I knew I needed to take care of it. Every time I saw a superannuation statement, I was reminded of that item on my to-do list, and I’d feel a pang of guilt for still not having gotten to it.
When it comes to money, ‘doing nothing’ literally has a financial cost to it.Credit:Sam Bennett
Yet, the guilt was never quite enough to actually get me to do something about it. There was always something more urgent demanding my attention. Plus, I thought I had plenty of time. Retirement was decades away.
So, I procrastinated. I had no idea at the time just how much this procrastination would cost me.
A recent report on procrastination by insurance company Suncorp showed two-thirds of Australians procrastinate about making financial decisions, despite 85 per cent being concerned about their financial future.
The cruel irony is that most people don’t realise that one of the best financial assets you have is ‘time’. A bit of ‘time’ can massively increase your wealth without you lifting a finger. Let me give you an example.
Say you start investing $5000 a year this year, for the next 10 years, and earn a return of 5 per cent. Using ASIC’s compound interest calculator, you’ll see that you could expect to earn just over $16,000 in interest.
But let’s say you spent the next year procrastinating. You’re scared to take the leap, so you tell yourself you’ll start investing later when you have more money or more time.
So, you invest nothing this year and then $5000 a year for the next 9 years with the same return of 5 per cent. Over the 10 years, you could expect to earn just over $12,800 in interest. Just that one-year delay alone cost you over $3000.
Of course, that cost balloons over time. Looking back, I know that my years of procrastination on fixing my superannuation in my twenties will likely mean I’ll be tens of thousands of dollars worse off when I retire.
When it comes to money, ‘doing nothing’ has a financial cost. Every year you don’t fix your finances, you are costing yourself money. Over your lifetime, that could easily cost you six figures – or more.
This is the price tag of financial procrastination. The impact on people’s lives is enormous.
I get to witness this impact first-hand. As a financial educator, I’ve helped hundreds of Australians turn their financial lives around. Frequently, people come my way after years of avoiding their finances.
The thing to realise is that the impact of financial procrastination is not felt today, tomorrow, or even next month. It’s felt years from now, and it comes in the form of ‘regret’.
That’s why one of the most common phrases I hear from our students once they’ve finally gotten a handle on their finances after years of avoiding it is: “I wish I’d done this 10 years ago.”
There is that sobering realisation that if you’d done just a few things differently a bit earlier on, your life would look very different today, but now there’s nothing you can do to rewind the clock.
Now, I’m not saying you should live in regret about past mistakes, but the desire to minimise regret in the future can be a powerful motivator to help you move past procrastination and start taking action.
So, if you’ve been avoiding your finances, ask yourself: “am I willing to trade a significantly more comfortable financial life in 10 years, for the convenience of apathy and inaction today?”
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. Investors should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Paridhi Jain is the founder of SkilledSmart, which helps adults learn to manage, save and invest their money through financial education courses and classes.
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