Don’t let procrastination keep you from pursuing your financial goals.
Provided by Stan Evans, CFP
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.
Though Mark Twain famously quipped, “Never put off until tomorrow what you can do the day after tomorrow.” We know that procrastination can be detrimental, both in our personal and professional lives. From the college paper that gets put off to the end of the semester to that important sales presentation that waits until the end of the week for the attention it deserves, we’ve all procrastinated on something.
Problems with procrastination in the business world have led to a sizable industry in books, articles, workshops, videos, and other products created to deal with the issue. 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.
As the example below shows, putting off investing may put off potential returns.
Early Bird. 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, it has also allowed the investment returns more time to compound.1
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.
Stan Evans may be reached at 410.821.2920 or firstname.lastname@example.org.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
With an IRA, once you reach age 70½, generally you are obligated to begin taking required minimum distributions.
Your required minimum distribution (RMD) may be based on your age or the deceased’s age at the time of death. Penalties may occur for missed RMDs. Most are required to begin by December 31 of the year following the date of death. Any RMDs due for the original owner must be taken by their deadlines to avoid penalties. You will pay taxes on any distributions you take. Consider speaking with a financial professional who can help you evaluate the potential impact an inheritance might have on your overall tax situations.
The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Federal and state laws and regulations are subject to change, which may have an impact on after-tax investment returns. Please consult legal or tax professionals for specific information regarding your individual situation.
The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties.
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1 – nerdwallet.com/banking/calculator/compound-interest-calculator [12/13/18]