Procrastination: Is it the enemy of good financial planning?

03 June 2015

Do you already have a solid financial plan in place? Or are you just starting to think about it? Or are you so overwhelmed and daunted by the task that you're avoiding it altogether?

That's the thesis of The One-Page Financial Plan, the new book by New York Times columnist Carl Richards. Rather than over thinking everything to the point of paralysis, just jot down a few general goals, get started, and don't beat yourself up over past mistakes.

Richards talk about the surprising power of simplicity of getting started:

"I had a plan. It was a perfect plan to power through a bunch of stuff I needed to get done. Too bad the plan started to unravel before I even left the house. By the end of the day, my plan had ceased to exist. I still managed to get a lot of stuff done, but the order and the method didn't look anything like my perfect plan.

I could have gotten hung up on the idea that my plan was the ONLY way to get through my list. I could have let perfect become the enemy of the good. Instead, I wanted to get things done that I knew needed to be done.

I'm guessing what I just described sounds a lot like many of your day-to-day routines, too. We come up with perfect plans to get everything done, then we wake up and realize that real life rarely works that way. But we still manage to check things off our lists. This practical focus seems to go MIA when it comes to our investing.

We tell ourselves we can't possibly invest our hard-earned money unless we've identified perfect investments. Perfection means different things to different people. But with investments, it often means, Guaranteed to make me a lot of money with very little risk. There's one, teeny-tiny problem with this definition. It doesn't exist. Unfortunately, that doesn't stop people from trying to find these perfect investments.

That's why getting started is such a big deal. By letting go of the need for perfect, we recognize the end goal matters so much more than whether the journey is perfect. I want to reach my financial goals. I know you want to reach yours, too. But we'll never get there if we keep waiting for something that's highly improbable."

"You cannot escape the responsibility of tomorrow by evading it today." - Abraham Lincoln

Planning for retirement involves near-term actions with distant consequences, and it is easy to put it off when faced with more immediate temptations or demands on one's time. Indeed, the trade-off between near-term costs and distance consequences is the reason that economists treat procrastination as a stemming from present-biased preferences. Procrastination can therefore be seen as the enemy of good financial planning.

Chris Taylor from Reuters recently quoted Hollywood screenwriter William Goldman saying: "Nobody knows anything." In other words, no one knows where the market is headed. No one can tell you exactly what financial moves to make. And no one knows where they are going to be 40 years from now.

Here is what you can do: Make your best guess, start and happily muddle through life the best you can!