The Cost of Procrastination

Some of us share a common experience. You’re driving along when a police cruiser pulls up behind you with its lights flashing. You pull over, the officer gets out, and your heart drops.

“Are you aware the registration on your car has expired?”

You’d been meaning to take care of it for some time. For weeks, you had told yourself that you’d go to renew your registration tomorrow, and then, when the morning comes, you repeat it again.

Procrastination is avoiding a task that needs to be done – postponing until tomorrow what could be done, today. Procrastinators can sabotage themselves. They often put obstacles in their own path. They may choose paths that hurt their performance.

There are a number of theories about why people procrastinate, but whatever the psychology behind it, procrastination may, potentially, cost money – particularly, when investments and financial decisions are put off.

Product Changes:

The opportunities of today may not be the same tomorrow. With the current interest rate market, insurance products are changing frequently to reflect the current interest rates. More often than not, this means reductions in the guarantees, cap rates, interest rates and more. Don’t wait to buy something you like today because the product, or price, may be different tomorrow.

Healthcare Changes:

Tomorrow is not promised, and neither is your health. And remember you can’t get life insurance once you need it! Many times, clients assume that they can qualify medically later for more insurance. Long-term care strategies may also require a medical exam and procrastination could remove those options altogether. 70% of people 65+ will need long-term care at some point in their lives. Don’t procrastinate on making a plan today.

Early Bird

As the example below shows, putting off investing may put off potential returns.

Let’s look at the case of Cindy and Charlie, who each invest a hypothetical $10,000 to start. One of them begins immediately, but the other puts investing off.

Charlie begins depositing $10,000 a year in an account that earns a hypothetical 6% rate of return. Then, after 10 years, he stops making deposits. His invested assets, however, are free to keep growing and compounding.

While Charlie fills his account, Cindy waits 10 years before getting started. She then starts to invest a hypothetical $10,000 a year for 10 years into an account that also earns a hypothetical 6% rate of return.

Cindy and Charlie have both invested the same $100,000, but procrastination costs Cindy, as Charlie’s balance is much higher at the end of 20 years. Over 20 years, his account has grown to $237,863, while Cindy’s account has only grown to $132,822. Charlie’s account has not only put the power of compound interest to work, but it has also allowed the investment returns more time to compound.

This is a hypothetical example of mathematical compounding. It’s used for comparison purposes only and is not intended to represent the past or future performance of any investment. Taxes and investment costs were not considered in this example. The results are not a guarantee of performance or specific investment advice. The rate of return on investments will vary over time, particularly for longer-term investments. Investments that offer the potential for high returns also carry a high degree of risk. Actual returns will fluctuate. The types of securities and strategies illustrated may not be suitable for everyone.

https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html
Advisory services offered through J.W. Cole Advisors, Inc. (JWCA) SimplePath Retirement, LLC and JWCA are unaffiliated entities.