Posts Tagged ‘financial procrastination’

Difficult times in the recession

A new concern in the post-recessionary market is financial procrastination. The economic downturn of 2008 and 2009 adversely affected the budgets of many people. Mary Casey, housewife in Los Angeles, California, said, “We were aggressive savers, but once my husband lost his job, we had to use every last resource we had to cover our expenses… it was either do that, or lose everything.” She isn’t alone, as many have foregone savings for survival.

The recession is over

Now that the recession is over, studies are showing many consumers fell into the category of abandoning their savings plan. Though it is understandable, financial experts are saying that there are serious repercussions of ending a savings initiative, even if it is only for a few months.

There are others who also neglected to put money away. They put off saving for retirement altogether due to a number of other issues. Some claim that they never had enough of a reserve to start saving, while others claim that they prioritized more immediate financial needs over retirement. Regardless of the reason for financial procrastination, the result can be devastating. Here are some problems with financial procrastination.

Financial procrastination’s results

One of the biggest issues of financial procrastination is delaying investing. Delayed investment can cost plenty. Consider, as an example, Mr. A and Mr. B who both began investing $ 2,000 per annum at 30 and 40 years of age, in an IRA. If the annual rate of return averages to 5% for both, by age 60, the outlooks for both will be markedly dissimilar. Mr. A would have about $ 132,800 saved, whereas Mr. B would only have $ 66,100. The difference is a startling $ 66,700. Naturally, part of the return was the additional decade Mr. A had to invest, but the point is that procrastinating costs.

Another issue when it comes to financial procrastination is avoiding looking at personal finances. A person that has a savings plan likely did some research to set it up. An investor will have an intake interview by a financial planner. They will ask what a persons’ goals are, their expenses, revenues, and get into the long term goals. Martin Laurel, financial planner in Dallas, Texas, said, “Some consumers are surprised at their financial position when they really take an honest look at it. It may be difficult, but it’s critical to creating a workable plan and sticking to it.”

Finally, people who procrastinate with their financial planning tend to also procrastinate with filing taxes. This is a critical mistake that can cost a consumer dearly. The IRS charges a monthly penalty of 5% of the tax payable for failure to file income tax returns by their due date, up to a maximum of 25%. This means that a person with a tax balance of $ 5,000 and doesn’t pay it on time, the penalty is $ 1,250 plus interest and fees.

Commit to a financial plan

Though it’s easy to fall into financial procrastination, it is also dangerous. For consumers who have agendas and goals, even a small lag in saving can throw their plans off and they may never fully recover. Anyone desiring a healthy financial future, it’s best to create a plan and stick to it, regardless of market fluctuations.