Sharing an unpublished interview on Procrastination and its effects on our Financial Life.
Procrastination has as heavy effects as its spellings .
Q 1. What do you understand by procrastination while investing and its effect in long term while building corpus for goals?
Ans: Procrastination is undue delay in taking action. It unnecessary puts undue stress and occupies a space in one’s mind. Procrastination comes with a lot of extra baggage. Every delay has a Cost attached to it. The cost could be physical as well as financial cost. It leads to underachievement of financial goals, Slowly and steadily kills one’s aspirations and develop inefficiencies. After a stage has crossed, even a small pebble would seem heavy for them to lift and they may not be able to take even a small financial decision.
Q 2. How often do you come across investors / clients procrastinate (delays) with investment decisions while execution of financial plan?
Ans: Nearly 70% of the investors delay investing decision in the first place. The counter that they give is that they have other expenses to look after, they will invest once they are left with surplus to invest. Also, another reason that I come across frequently is lack of time for managing Finances.
Q 3. How do you tackle with clients who procrastinate and make them believe such practice will affect building a corpus?
Ans: We generally follow a process of making them write their financial goals/ aspirations on a piece of paper along with present value of that goal. For example: Goal of Child education after 15 years will cost Rs. 5 lacs in current worth and for that he will have to save Rs. 5000 per month and if he delays investing by 5 years, he may have to save Rs. 10000 per month , not only this but this will also lead to underachieve his goal.
Q 4. How do you educate clients on effects of procrastination?
Ans: We tell them about story of vitamins and life saver Drugs and ask their preference :
Scenario 1: Our Nails have White Spots and we know it is Deficiency of Minerals &Vitamins. Hence we delay our visit to doctor as it is neither Life Threatening, nor Painful.
Scenario 2: In the Middle of Night, a Pain is felt in one of our teeth which start growing. We immediately grab a Painkiller and have it. And in absence of which, we drive down to the nearest 24*7 Chemist, Buy the Medicine, have it there, Sleep and Visit a Dentist the next day. See how…. We ignore Vitamins but Rush for Pain killers. If Vitamins are taken regularly, then we may never need to take Pain Killers. It is Similar Scenario in Financial Planning.
Q 5. Share a case study / an experience of an investor (client) in which his / her crucial goal was deferred or affected due to procrastination (name in case study / example can be changed). What action / alterations you suggested to achieve that goal at later stage for same client?
*Feel free to explain with charts / tables in your example (case study).
Ans: Two brothers Mohit and Rohit attended our Wealth creation workshop in 2008. They both wanted to plan for their retirement goal which was 20 years down the line. Mohit agreed to start SIP of Rs. 5000 immediately for the goal whereas Rohit was convinced about the investment but promised to start after 5 years that is in the year 2013 when his goal was 15 years away.
Rohit’s decision of delaying investment had following effects:
- The amount that he will be getting on his retirement will be half of what his friend Mohit will be getting.
- Rohit will have to cut down on his monthly expenses post retirement as the corpus built will not be sufficient for his post retirement needs.
Suggestions made in 2013 for Rohit:
- Increase monthly investment by another Rs.5000 to cover up for the delay cost loss.
- The major asset allocation was changed to equity considering long term goal in mind.
Remember “Time has no Substitute and the minute we need a thing we begin paying for it whether we buy it or not.”
About the Author: Gurleen Kaur is a Financial Consultant and devotes her time to her company www.hareepatti.com. She has done her Bachelors in Finance and Investment Analysis(BFIA) from College of Business Studies(CBS, Delhi) and MBA from IMT, Ghaziabad. She can be Contacted at email@example.com