The Financial Costs of Procrastination

This ” The Financial Costs of Procrastination ” post describes the bad effects of procrastination. It is the author's attempt to provide example how this will affect those who procrastinate. This post contains affiliate links/ads. See disclosure policy

I will do it next time. I will do it later. I don’t have the time. Maybe I’ll finish this after I do this. These are just some of the common excuses of procrastinators.

By definition, procrastination is avoiding a given task that needs to be completed.

I have not met a person who has not procrastinated in their lifetime. I know I am guilty of procrastination a lot of times. This is why I make my wife angry or frustrated at times.

There are reasons people procrastinate. You may see yourself fall into one or more of these categories. According to Oregon State Success Center, people procrastinate because of:

  1. Deficits in skills. People delay doing activities or assignments because they do not know how to fulfill the given tasks or do not want others to know that they can’t do such tasks.
  2. Lack of interest. Some people don’t want to work on assignments because their interests don’t necessarily align with the tasks at hand.
  3. Lack of motivation. Some people procrastinate because they don’t see any incentives on performing given tasks.
  4. Fear of failures. Many procrastinators feel that they will just fail if they do what they are assigned to do.
  5. Fear of successes. Ironic as it may sound, people may or will delay accomplishing their assignments if they feel that they will complete them right away and that more is expected of them next time they do other or similar tasks.
  6. Attitude of rebellion and resistance. Many people especially young ones will display procrastination as a mark of rebelling and resisting against expectations and standards imposed to them by others.

Procrastination may seem non-harmful. Procrastinators may believe that, for the most part, time is the only one that’s really getting affected by procrastination. The truth is it can cost a lot. It can be harmful to both personal and professional lives. Procrastination can derail someone from achieving his or her goals in life.

The same reasoning can be applied to finances. The financial costs of procrastination can be dramatic and, sometimes, may be impossible to recover from.

Financial costs of procrastination

Procrastination can cost you a better paying job. It can cost you to pay late fees because you think you have more time before the due date comes when you really don’t. These are just a few of the results that can happen when procrastination is in effect. Let’s go through some of the financial costs of procrastination.

Investment growth

If you have read up to this part, you are probably aware of what is called compounding interest. If not, compounding interest is basically interest earned on interest. In much simpler terms, it is the interest calculated on the principal and any accumulated interests of prior periods of deposits.

So what does this one mean? It means that the early you invest, the better chance your investment will grow. Let me give you an example. If you are 20 years old and initially invest $1000 and subsequently $100 a month for 30 years at 8%, then, you would have $146,002.51. If you delay investing and start at age 30, initially invest $1000, and subsequently invest $200 a month for 20 years at 8%, then, you would have $114,489.67 according to investor.gov.

In this scenario, you would invest early your total contribution would only be $37K. If you invest late (i.e. at 30 years old), your contribution would be $49K and your return would still be less than if you invest early.

Credit cards

One of financial costs of procrastination is late fee. Credit card companies can and will charge you late fees when you don’t pay on time. First violation will cost you $25. If you’re late for the second time within the next 6 months, you will be slapped with $35 late fee charge.

They may also increase your interest rate. If you pay your balance in full, then, you may not care about a substantial increase in your rate. But if you carry balance from one cycle to another or more than one cycle, then, this increase will cause you to pay interest on top interest. Yikes.

To avoid paying late, it is best that you setup your payment automatically. Most companies have this feature and won’t charge you a dime to use this service. You can always change the scheduled payment dates when you want to.

Repossession

Haven’t made any payments towards your house, car, and other assets for a couple of months? If your answer is yes, chances are the lenders have been constantly contacting you. Aside from this, you may also see late fees charged to your account. But the worst of all these financial costs of procrastination is repossession. When you’ve gotten to this point, you know the situation is in its worst state.

Repossession can more than affect your finances. It can put stress on you and your family. Lenders can pull your assets out if these assets are directly tied to you loans. If you obtained a secured loan, then, your collateral can legally be repossessed.

Repossession is one of the worst financial costs of procrastination. It is not for the faint of heart but it can and will happen because lenders have the right to do so base on your contract with them.

To avoid repossession, contact the lending companies if you can’t afford to meet your responsibilities. You can ask for repayment schedule, payment arrangements, or others. It’s better to communicate with them than to avoid them.

 

Tax Filing

Tax returns are due, almost always, on the 15th of April. Basically, you have 2.5 months to complete your tax returns (i.e. February 1st to April 15th). I am using February 1st since employers are required to send out W-2s by January 31st.

Of course, this doesn’t mean that people will be able to file their returns on time.

Failure to file tax returns and pay taxes accordingly can cause you to pay interests and penalties, which are what I consider the financial costs of procrastination.

Dealing with the IRS can be easy if you work with the agency. You can always ask for a waiver for interest and penalties. I know IRS can waive fees because my sister forgot to send hers on time a couple of years ago.  The IRS waived the charges because it was her first time to fail to file on time. But waivers may not be possible for repeat late filers.

If you are trying to delay paying your taxes and are using this as your reason to file late, then, stop doing it. You’re not doing yourself a favor. You will pay both interest and penalties.

The best thing you can do is to work with the IRS. It will work with you back as long you as commit to whatever terms and agreements you both come up with.

Life Insurance

In general, life insurance is cheaper when you get it when you are young. There are a couple of reasons for that but the bottom line of all these reasons is risk.

  1. Young people with life insurance are less likely to make a claim in the foreseeable future. In short, young people are less likely to die earlier than older people when you take into account the age, health, and other factors.
  2. The length of time the policy is enforced. A lot of people cancel their life insurances for many reasons. Almost always, companies are likely to earn more when you hold the policy longer and cancel it at some point.
  3. Young people are generally healthier than older people. The healthier a person is, the higher the chance he/she will live longer.

As I said, these reasons are associated with risks. Insurance companies tend to look at younger people as less risky than older ones.

If you keep on procrastinating on getting a life insurance for yourself, chances are your premiums will be higher even when the benefit amount remains the same. These higher premiums are what I call the financial costs of procrastination.

In addition, if you keep on telling yourself that you’ll get it next time and you become ill (e.g. diagnosed with diabetes and heart diseases), chances of you getting a life insurance will be close to impossible. If you do get a life insurance, be prepared to pay exorbitant premiums.

Education

Some people don’t want to incur a ton of student loans. So, they delay attending college, try to make some money, and save it to pay for school.

Many times, these people will never go back to school because, as time goes by, their responsibilities grow exponentially. Some people build a family and have kids. Some don’t want to go to back because they feel like they already lost their chances.

There are studies indicating that college graduates earn more than HS graduates. One study states that college graduates earn 84 percent more than HS graduates.

Although education is not always a ticket to success or making a lot of money, a lot of opportunities will be opened when you have a college degree under your belt.

Health

It’s probably human nature but a lot of people won’t get checked when they feel something is off with their body. Some would say that what they are feeling is normal, is caused by working too hard, or something else.

For me, when it comes to health, I don’t usually guess and make a self-diagnosis. Although I know my body, it never hurts to seek medical opinion from professionals. I always remember that prevention is always better than a cure.

If you feel something is off, get checked. The earlier you get yourself checked, the higher the chance you’ll get the medical treatment you need. If you wait and the situation has become out of control, you are not only putting yourself at the risk of paying a lot in medical treatments but you are also risking your own health and life. This is what I call the financial costs of procrastination.

Teaching

As a parent, I want my daughter to grow into a loving, caring, and frugal person just like me and my wife. I know a lot of parents feel the same way, too.

Some parents like to spoil their children. There’s nothing wrong about it when it’s done with a purpose. As I always say, anything excessive is bad. This same reasoning goes with spoiling children.

Just from my observation, children who are really spoiled tend to spend lavishly on unnecessary things when they grow up. They tend to have difficulty differentiating the needs from the wants. I know that because I have friends who just like to spend as if there’s no tomorrow or like they won’t run out of money.

The earlier you teach kids about practicality, the higher the chance they will understand about needs and wants as well as saving and spending. Why? It’s because they have more time to understand and internalize the concepts behind the ideas of needs, wants, saving, spending, among others.

It is also beneficial for you to teach your kids about money as much as it is for them because you could save a lot of money by not buying the things your kids don’t need.

Just remember, it’s never too early to teach kids about money.

Conclusion:

There are financial costs of procrastination. Some are easy to solve and some aren’t. It is always in your best interest to be proactive and act right away than delay what you need to do because you are more likely to pay more than less.

Do you believe these are some of the financial costs of procrastination? Do you have an experience related to the bad effects of procrastination?


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