7 Types of Financial Procrastinators
We all tend to practice avoidance when we know something in our life is not what it should be. For whatever reason, we delay taking action. In terms of personal finance, which type of financial procrastinator are you?
Waiting for the Perfect Time to Invest
The first type of financial procrastinator waits for the perfect time to invest.
The thing is, it is a rare day to come across the perfect timing for anything in life. Waiting for the market to take a dip before you invest is pretty devastating to your net worth. Let’s take a look at why…
By waiting on timing the market you lose out on something amazing called compound interest. For instance, when you receive dividends you can reinvest them and buy more shares. If you wait to invest then you lose out on this. Also, the market may very well end up going up and you will lose out on all those gains.
Let’s say for some reason you have a stash of cash laying around and the market has a 40% correction. You are ready to finally sink some money in the market. You have waited a long time for this and they day is here!
Well, if you bought 2 years ago then you would have paid $45 per share but you waited 2 years and the market kept rising. Finally, the market hit an all time high of $85 per share before plummeting 40%. Where does this put you?
You buy in at $51 per share, which is actually higher than what you would have paid if you just invested 2 years ago plus you also missed out on all those dividends that could have increased the size of your portfolio.
You kept your cash in a high interest savings account but with interest rates so low, and inflation eating away at the value each year, its as if you received nothing.
At the end of the day, neither you nor anyone else can time the market and predict what is going to happen. By doing so, you miss out on a lot of wealth building.
Waiting for the Perfect Investment
Another type of financial procrastinator waits until they find the perfect investment.
The catch – there is no perfect investment because life is not perfect.
If you are trying to find a risk free investment with a high rate of return – good luck. Have you ever heard the saying,
The higher the risk, the higher the return and the lower the risk, the lower the return.
There is a trade off and a risk for everything.
For instance, do you want no risk? Well, put your cash in a savings account where the FDIC guarantee is $250,000. Unfortunately, your net worth is not going to grow. Actually, the value of your dollar is going to decrease.
Can you take on a little more risk? Try bonds – but the rate of return for bonds is pretty darn low. Bonds are good to reduce the dramatic fluctuations of the stock market so you can mentally weather the storm. If you are close to retirement or near retirement then they can help stabilize the cash you need to use from your portfolio in the short-term.
What about a real estate investment property? This is a great way to increase your net worth in the long term but there is also a really high entry point price tag. With the pandemic putting holds on evictions for who knows how long you may actually experience negative cash flow. Do you have enough capital (money) to weather the storm?
Individual stocks are risky if you don’t know the underlying health of the Company. Something sudden and unexpected could cause bankruptcy and if you have all your cash pumped into one company you will end up with nada.
What should you do?
Realize that every opportunity has its risks. It doesn’t mean you should wait to invest or not invest. It simply means, risk is part of life. No risk, no reward.
Waiting for the Best Price
The third type of financial procrastinator waits for the best price.
First of all, saving and investing should be viewed as a long-term game. Who cares whether you paid $45 per share or $50 per share 30 years ago?
Second, price and value are different.
Price is what you pay, value is what you get.
Let’s say one share of Tesla stock is currently selling on the market at $10. Would you say the value of Tesla is also $10 per share or do you think the value could possibly be $500 per share?
If you know the real value is $500, would you still buy Tesla stock at $100? $200? Or would you wait until you could get the best price of $10?
It is highly likely you would still invest in Tesla at $200 per share and feel just fine about it, knowing the value is $500 and growing.
The point is this: don’t base your investment decisions on price, base them on value.
However, as a regular everyday person, it is difficult to assess the true value of a Company. If you are interested in stocks, the best bet for the average person is likely going to be an index fund of some sort.
If you are interested in real estate, start doing your research on the market. Even neighborhoods within your market can have big differences. Read books, join Facebook Groups, watch YouTube, go to seminars and Meetups.
Waiting to Create the Perfect Portfolio
I said it before, and I will say it again – there is no such thing as perfect.
The next type of financial procrastinator waits to invest until they can create the perfect portfolio.
Do not get caught up in analysis paralysis. What do I mean? Analysis paralysis is a term to describe over-thinking and over-analyzing, rendering you incapable of making a decision and taking action.
Let’s say you are interested in buying an investment property. You do the market research, run the numbers in numerous online calculators as well as your own excel spreadsheet, speak with industry professionals.
Every calculation and person you speak to has a different take, you have so many opinions and thoughts going on in your mind, you don’t know what to think anymore.
You have all the information to make an informed decision but you are still running the numbers, doing market research, and talking to professionals and friends.
This is analysis paralysis.
At the end of the day, every opportunity has risk. If you are actually, legitimately interested in growing your net worth then you must make your own decisions and take action.
Waiting for Your Career Situation
Are you the type of person that wants to hold off on investing until you get your career situated? Maybe you want a little more stability in your earnings, or maybe you are waiting on that promotion. Whatever the reason, you just feel like you want your career situated before you start playing around with investments.
While on the rare occasion, it might make sense to hold off on investing, this is not one of them.
If your cash flow isn’t the best, it’s time to budget!
The earlier you invest, the longer the time horizon, the higher your net worth. You do not want to be playing catch-up in your 50s. You do not want to be worried about being replaced by someone younger an cheaper at your job. What you do want is to be financially sound, so that if something bad happens, you are prepared.
The best way to be prepared is to stop waiting for your career.
Waiting for your Life Situation
Another type of financial procrastinator is one who wants to wait to invest until their lifestyle is nice and comfortable.
Are you saving to buy a house, a car, paying off debt? Do you want to travel the world while you are young? Do you like to explore the City, meet up with friends for a few drinks or brunch on Sundays? Maybe you are facing an illness and just want to focus on healing and getting better.
Regardless of the reason, there will always be a life situation that prevents you from investing.
So what is the real reason you are not investing?
Maybe you are not confident in investing – maybe you just don’t know what to do. Venturing into the unknown is scary – terrifying, actually.
Maybe retirement is just so far off in the distant future that you have PLENTY of time.
The one excuse for not investing that might be considered valid is paying off high-interest debt. But even then, you should be investing the minimum of an employer match in your 401(k) or other similar plan – if offered.
The biggest thing to realize as a Life Situation procrastinator is that there will always be something else going on to prevent you from doing something. But time keeps going – it will not wait for you. In the blink of an eye 10 years will go by, then 20 years, then 30 years, and if you didn’t invest how will you feel?
Waiting for the Perfect Tax Situation
Taxes are a drag. I don’t know anyone who likes paying them. They are one of the largest burdens to wealth accumulation.
Waiting to invest because you do not want to pay taxes is the last type of financial procrastinator.
The tax code is messy and the rules change sometimes. However, not investing because you do not want to pay taxes is not the answer.
In a very simplified example, let’s consider the following:
You invest $3,000 in a taxable brokerage account. 10 years later, the investment is now $5,000 and you sell the investment. You are on the hook to pay $2,000 of long-term capital gains taxes.
Would you rather not have the $2,000 less taxes?
Do you need to consider the tax impact of your investments before you invest? Absolutely.
Should you not invest because you do not want to pay taxes? No way.
- Have you ever struggled with any of the above financial procrastinator types? Are you still procrastinating or did you take action? Share in the comments below, I would love to hear your story.
- Have questions? Let me know! I am happy to answer.
- Sign-up for the Green is Good Cents Newsletter for quick tips on how to get better with money.
- If you like this article, please share on Pinterest!