By Kenney Khew
Procrastination can be defined as the habit of purposely delaying to make decision on certain matter. However, it is not regarded as lazy or inability to making certain decision.
For example, people procrastinate to prepare for retirement fund, children education fund, etc.
The following are the causes as to why people like to procratinate:
1. Not interested with the topic.
2. Distractions with other expenses matters
3. Too much focus on work
4. Too afraid of everything
Let me elaborate on each cause from a personal financial planning perspective.
1. Not interested with the tropic
I have encountered many people that are not interested in any planning such as for a retirement fund. I have proposed financial planning to single person about the age of 28, marriage couple age about 35 and unmarried man about 40 for the preparation of a retirement fund .
All their answers were ‘wait until the right time’. Single person would say wait until they are married while married couple would want to wait until their children are all grown up.
Meanwhile, the unmarried man would say wait until he has travelled around the world and meet his dream girl!
They do not realise that all these reasons are only causing delay in their financial planning and they would have to save even more at a later stage.
2. Distractions by other category of expenditure
People like to focus on the other matter such as traveling the world, changing luxury gadgets and new vehicles.
But if they were to avoid spending on those items, you could have saved a lot of money.
For instances, you save RM10,000 a year (by not spending on those items) and instead, puting the money into a fixed deposit to earn an interest rate of 2% p.a. for the next ten years. The future value is about RM109,497.
Therefore, you can see clearly that the total amount saved will grow in the long term as you earn interest of 2% p.a. It is not only delay gratification but you can use the monies for important financial goals in this pandemic time such as reducing your housing and car loan in order to decrease your total liabilities and lead to an increase of your net worth.
3. Too much focus on work
Focus on work or your business is important but to have better planning is more important. Many of us like to have a work-life balance.
Thus, personal financial planning is a way to achieve a work-life balance. Financial planning includes your investment, cash flow, retirement, child education fund, insurance, estate and tax.
Please do not regret later on as you discover that you have neglected some of the important planning and already running out of the time.
As such, buy enough sum insured at a young age when we are healthy. Start by investing RM500 per month from the first month of work until retirement age as to leverage compounding interest and also dollar cost averaging effects.
4. Too afraid of losing everything
Some people tend to feel afraid of everything. For example:
a. In investment planning, they are afraid of losing money even a cent of their
b. In estate planning, they are afraid and superstitious for writing their own will.
c. In the insurance planning, they are afraid of wasting money by buying insurance
policies if nothing unfortunately happens such as illness and total permanent disablement.
Essentially, time is an important element in financial planning especially investment planning in order to let our monies grow over time and also to transfer our mortality risk to insurance company as early as possible as for wealth protection.
Kenney Khew is a chairman of FPAM Johor Chapter and also a licensed financial planner of Phillip Wealth Planners Sdn Bhd. He can be contacted at firstname.lastname@example.org.