Knowing Your Money Personality
Part 4 of 6
Does this sound familiar? “I work better under pressure” or “I have all day to get it done, I’ll do it later.” If you’re nodding your head as you’re reading this, you are thinking of someone you know who fits the bill. This person is a Procrastinator. It’s not a case of whether something is important or not, it just doesn’t take the priority. The to-do list of today is the problem of tomorrow if it isn’t tackled. In Class, they are the ones who study at the last minute. At the office, they are the ones that seem to always be scrambling talking about how busy they always are and how they aren’t enough minutes in an hour. They may thrive under the pressure of the clock but being a Procrastinator can catch up to you and your money.
We have been taking a closer look at our relationships with money and the different financial personalities. Dr. Judith Orloff did a great deal of work to better understand this relationship and describes five different personalities: The Worrier, The Addictive Spender, The Procrastinator, The Hoarder/Saver, and the Intuitive Spender. Last week we looked at the behavior and thought patterns of The Worrier and this week we take an in-depth look at the Procrastinator.
Procrastination and your finances
Procrastination may seem harmless but when that bad habit is carried over to our relationship with money it can have severe consequences. Many people think that “timing” isn’t as important as it really is when your money is at stake. Everything from paying more for something because you waited until the last minute like a plane tickets or holiday gifts to not getting your investment account set up with that automatic $25 going in bi-weekly (Oh yeah I was going to do that last year).
Often the words procrastination and retirement come closely tied together. Financial planners will often ask “are you investing or saving for your retirement?” However, retirement funds are not the only thing The Procrastinator should be concerned about. If you procrastinate when it comes to your finances, know that now is better than never. Don’t feel like it’s ever too late to change your behavior, become informed, and make better saving and spending decisions.
If you can’t stop studying for your test at the last minute or being one of the thousands at the mall the day before Christmas hopefully after reading this list you can get some of these financial areas off your to-do list.
Saving for College
Procrastination with investments can cost you big bucks. Starting your investment fund for College earlier just by 5 years will have a dramatic impact on how much your investment grows. Whether for you, or your future child, saving for that college fund can also save you money down the road. Even with good credit and decent interest rates, you will pay more in loans with interest than paying upfront—often tens of thousands of a difference. Check out this procrastination cost calculator at Saving For College.
If you are putting off college for yourself, consider your finances. The cost of waiting to go back to school is growing. College Board reports that since the early 2000’s, tuition has been steadily increasing—room and board even more so. If you are considering graduate school, take advantage of it now—especially if your employer has pay back or other incentives. Your future self will thank you.
Building a Safety Net
Procrastination usually isn’t a conscious decision. It’s a habit that’s been developed our years and years and we don’t feel the effects until something unexpected happens. Life can be unpredictable—broken cell phones, surprise party weekend for a girl friend, unforeseen job loss, hospital visits, moving expenses, the list goes on and on. If you lost your job today, how long would you be able to support yourself without a paycheck while you look for another job? It’s scary right? Over half of Millennials today in North America don’t have $1000 saved up.
One of the ways to build a safety net is by creating a “cushion” on your bills. This is one of Sprout’s basic principles. We suggest building a cushion or overpaying your bills by a small amount until you are one pay cycle ahead. Let’s take your cell phone for example. If your bill is $50 / month, pay $55 for 10 months. Trust me that you won’t miss those $5 each month and when you see on your bill that your phone company actually owes you money you will feel great! We call that the FU effect 🙂
For young professionals in their 20’s this can be one of the furthest things from your mind and easiest to procrastinate on. However, we can’t predict the future so while safety nets and cushions help with minor setbacks, what if something serious happens? We need to be prepared.
There are many types of insurance and that is a topic for a whole other series but we’ll touch on this because it is important. Insurance for accidents or sickness is a must. There are plans that cover a percentage of your regular paycheck if you are unable to work. This could be disability or job-loss insurance, the names vary depending on what region you are in. These types of insurance are often small and you can set them up to be taken out on the same day that your pay comes in.
Procrastination is always alive and well when it comes to fixing things around the house. If you own a house you know there’s always SOMETHING that can be fixed, updated or improved. Staying on top of your maintenance and fixing small issues as their come up will save you thousands down the road. Inflation is also a beast that follows the procrastinators at their heels. Not to get too technical but inflation is the rate at which the price of good and services increase. Basically it’s how everything gets more expensive each year. The cost of construction according to RS Means, a popular and trusted construction estimation source, has climbed considerably.
Paying your Credit Cards
Procrastination is a cliff that most don’t realize they have fallen off of until it’s too late when it comes to credit card debt. Credit card payments may be convenient at the time but they come with extremely high interest rates. Have you ever wondered why it doesn’t feel like your paying your total down? It’s because you’re not! Credit Cards calculate interest daily vs. loans that are monthly. That means it takes longer to pay off a credit card than you may think because your payments are mainly going towards interest. Anything you buy can cost you 20% more than if you paid in cash.
Our lives are often busy and hectic. It’s super easy to push off these decisions and conversations to another day, that turns into another week that turns into another month that turns into another year. The consequences of procrastinating don’t seem to be any more of an incentive to change our behavior, so we have to figure out our own motivator to take ownership of the situation and plan ahead. Here are some ways to end your procrastination habit:
Set up a Long-term Financial Plan
This could be on the back of a napkin, later translated to your computer or a well mapped out excel sheet that crunches numbers. But think about goals—realistic ones. Create milestones and set deadlines for yourself. Having your goals in bite-size pieces will help it feel less daunting and will likely be easier to accomplish. If you’re more of a techie then check out our App, we make setting goals easy.
Depending on what motivates you, a financial planner may be what gets you on track. Having someone keep you accountable will help keep you focused. No one likes letting someone down right? If you can’t afford a financial planner check out our App, we help you prioritize your financial goals and help you build the right financial habits to help you hit your goals.
Reward yourself for Successes
Forbes counts a reward in progress as one of seven steps to ending procrastination. The reward doesn’t have to be something that involves spending more or doing something grand. It could be joining friends for a bike ride or making one of your favourite desserts. Just spending time recognizing that you achieved that step will help keep you on track.
“The Internet Guide to Funding College and Section 529 College Savings Plans. Savingforcollege.Com.” Savingforcollege.com, www.savingforcollege.com/.
- “Tuition and Fees and Room and Board over Time.” Tuition and Fees and Room and Board over Time – Trends in Higher Education – The College Board, trends.collegeboard.org/college-pricing/figures-tables/tuition-fees-room-and-board-over-time.
- “Historical Cost Indexes.” RSMeans Online, RSMeans Online, www.rsmeansonline.com/.
- Warrell, Margie. “Why You Procrastinate, and How to Stop It. Now.” Forbes, Forbes Magazine, 26 Mar. 2013, www.forbes.com/sites/margiewarrell/2013/03/25/why-you-procrastinate-and-how-to-stop-it-now/#74f6c6ab1837.
“I put the PRO in procrastination.”― unknown
If you enjoyed this article, check out www.savewithsprout.com to see what we’re working on. Jump on the mail list to get early access to our App and stay up to date with all the cool things we’re working on! Check back soon for a more in-depth look at our fifth Financial Personality in our “Knowing your Financial Personality” series.
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