How to eliminate the horrible costs of Procrastination

Dr. Piers Steel is the world’s expert on procrastination. He defines this horribly frustrating condition as “willingly deferring something even though you expect the delay to make you worse off.” Yes, not only does procrastination inevitably carry a cost – we even feel bad while we’re procrastinating.

So why do we – educated, intelligent, conscientious human beings – put off important things? Psychologists and Behavioral Economists have spent a lot of brainpower working this out, and you’ll be glad to know that the reason you procrastinate is not because you’re lazy or bad, but because of three ways our brain gets muddled up when choosing which task to do next. Understand these mistakes, and you’ve got a good shot at overriding them.

1. The ‘Muddled Maths’ mistake
When deciding how next to spend each upcoming chunk of time, we subconsciously do a little sum to compare the effort of tackling an important-but-daunting task now, against the cost of delaying it a bit.  Of course, the cost of each delay seems tiny. For instance, in the last two hours while “writing” this article I have also Facebooked an old schoolmate, made a cup of tea and rearranged the bottles in my wine fridge. What we forget is that the costs of all these “tiny” delays add up – which is why I am still sitting here. Indoors. At my desk. On a Saturday.

2. The ‘Presentation to the Board’ pressure
Whether we procrastinate also depends on when we’ll actually experience the consequences of our delay. That crucial presentation to the board is tomorrow, while retirement is years down the line… so your brain prioritises the situation with the most immediate consequences.. and once again your portfolio doesn’t get rebalanced, you don’t get round to making that investment… What’s worse, these costs of delay only becomes apparent much later – when it’s too late to turn back the clock and you can’t go back in time to action the important decisions you should have back then.

3. The ‘Not Till I Can Do It Justice’ mistake
Hardest to understand are those situations where we find we haven’t gone and done the things which actually mean a lot to us – like the person who loves a tidy home but whose bookshelves remain a mess for ages. This non-action seems so incongruous until you realise that the reason the shelves don’t get at least a quick tidy is because the home-lover is waiting for a sufficient window of time to give the whole house the good, proper spring clean they feel it deserves. So it gets delayed, and delayed, and delayed…

This ‘Not Till I Can Do It Justice’ mistake is particular frustrating and perplexing to its sufferers because they tend to be conscientious and reliable people by nature. Which explains why conscientious savers end up holding low-yielding cash in the bank for months (or worse –  years!), waiting and waiting to find a big enough block of free time to properly grapple with the whole task of handling their investments.

How to counteract financial procrastination
Because it’s your brain causing the problem, you can tackle procrastination by “reframing”. The human brain is much more comfortable making more little decisions rather than a few big, complex ones – so you can help it to do that by automating the complex investment process into a repeating series of regular, manageable decisions. Break your investment process into parts, and make these a part of your routine.

1. In January of each year, sit down with your advisor to work out and agree your clear savings targets: how much you’re going to invest, and when (which months, which quarters, when your bonus is due, and so on). You want your advisor to keep full records of this and remind you when you’re due.

2. Set up a bank standing instruction to automatically wire a set monthly savings amount into your portfolio to prevent you neglecting it when you’re under pressure with other deadlines.

3. Make sure you have a concise but thorough quarterly review with your advisor. Half an hour, four times a year is something you can stick too. Monthly is too frequent (you’ll start putting them off) and annually is too seldom – too much time to wander off track without being checked on.

4. Use this quarterly review to have your Asset Allocation updated, checked and rebalanced where necessary.

Taking care of your personal wealth management is a complex, high maintenance task – it’s a prime candidate for procrastination because it does require rigour, discipline, attention to detail, and systematic decision making. If you don’t automate these, procrastination will kick in – and the long term consequences are horrible.

Remember, people procrastinate because we’re human, not because we’re lazy or bad. You CAN beat the curse of procrastination. Automate the investment process, so timely investment decisions are simply part of your routine.