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Procrastination & Finance

As much as one would not like to admit, it is an undeniable fact that we all procrastinate at some point or before doing a particular task. I procrastinated before penning down this article, our team might have procrastinated before finetuning it or you might have procrastinated before reading it. Studies suggest that 15–20% [1]of the general population chronically procrastinate. Similar estimates were found across Australia, United Kingdom, United States, Spain, Peru, and Venezuela[2] as well. In the student population, the practice of procrastination is double, or even triple when compared with the general population, with almost 50% students found to procrastinate regularly[3]. Procrastination has become a household thing and we often wonder what triggers it. Let’s find out why.

Etymologically, the word Procrastination is derived from Latin verb procrastinare which translates to put off until tomorrow. But some part of it is also derived from the archaic Greek word akrasia which means doing something against our better judgement. The self-awareness of this future disadvantage immensely pressurizes our guilty conscience. This conscious choice of delaying tasks is completely irrational and leads to self-harm. The unfortunate part is that in spite of knowing that it is going to bear negative consequences in future, we still procrastinate.

However, we often save our best procrastination for our financial planning. Financial planning means thinking about future goals, addressing our current budgeting and financial problems, making spending cuts and all the complex tax planning. Majority people loathe this process, and thus to avoid the heavy thinking, we procrastinate and postpone planning for our finances. This leads us to delay saving for our retirement, have impulsive shopping trips, splurge on dining and vacations, balloon up our credit card debt, and at the end make hasty financial decisions because we have a pile of last-minute bill payments. We procrastinate taking decisions regarding personal investments and savings that ultimately instills an unhealthy financial behavior in our system.

Investing sooner means more time for money to grow and compound in the market, which is the driving force behind portfolio growth and a bigger nest for future. Putting off investment decisions until the market “improves” or the urge to “time the market”, could possibly cost us lakhs of rupees over the years. If we are delaying early investment decisions, then we must come up with a huge lumpsum at a later stage to catch up with the balance we would have had if we started saving early. Catching up is more challenging than it seems in our head and often we are just left with regret and disappointments. In an attempt to improve this situation, we begin making financial investments. But more often than not, due to insufficient time at our disposal to analyze financial reports and the “fine print” of investment contracts or inadequate financial knowledge, the made investment decisions turn out to be poor.

We, procrastinators are tempted by the instant gratification that brings us “Hedonic pleasure” (meaning instant relief) which deters and delays us from our planned long-term goals. Hedonic pleasure overrides “Eudaimonic pleasure” which is long-lasting feeling of well-being and self-satisfaction that is achieved from the fulfillment of our long-term goals. We also tend to postpone aversive or boring tasks because we find it more attractive to perform them tomorrow rather than now based on the false understanding that near-term pleasure outweighs future gains. This paves the way for “present bias”.

Present bias is the tendency of individuals to impulsively divert from a planned course of action to turn to something seemingly more pleasant (in the short term), focusing on how they feel today and prioritizing the momentary needs over the long-term ones. On a neural level, we perceive our future selves as strangers rather than part of ourselves and hence we feel a lack of emotional connection to them. In the back of our mind, we know that in a year’s time, it is still going to be the same old us, then too we fail to feel concern, a sense of understanding and empathy for our future self. In one  [4], the organizers used virtual reality to make subjects look at digitally aged photographs of themselves and then recorded their investing habits. They concluded that people connected more to their future self by seeing those digitally aged pictures and invested twice as much as a normal person. Interestingly, Insurance companies latched onto these findings to drum up more business. Bank of America Merrill Lynch[5] launched a service called that could make people perceive their future self, while Allianz also created a similar tool with the help of its own behavioral scientists.

If people find something that consists of complex knowledge and skills, some percentage believe that no matter how much they try they would not get it right. They fear failure and tend to put it off until the very last moment. They procrastinate on the matters where they either unaware about the subject or not confident enough in fear of being taken advantage of. Low self-control is another contributing factor to procrastination because such people cannot help but splurge on short-term needs and postpone their retirement plans.  Many procrastinators have more pressing priorities of finance and hence they have no option but to procrastinate.

Very often, we are ignorant about our state of mind and the effect of it on financial decisions. When we are faced with tasks that make us anxious or insecure, the amygdala i.e. the “threat detector” part of our brain, perceives the task as a genuine threat to our self esteem and our brain is wired to remove the threat in the present, irrespective of it causing us more stress in future. Our brain temporarily forgets the negative feelings surrounding the task when we delay it which then compounds. This is often coupled with increased stress and anxiety, low self-esteem, and the feelings of self-blame. It is ironic that we procrastinate to avoid negative feelings but end up feeling even worse. We millennials “live in the moment” which puts our future in jeopardy. Over time, chronic procrastination not only costs productivity, but also has measurably destructive effects on our mental and physical health, including chronic stress, general psychological distress and low life satisfactionsymptoms of depression and anxietypoor health behaviorschronic illness and even hypertension and cardiovascular disease.

Procrastination has other reasons too, like abstract goals, task aversion, perfectionism, fear of failure, fear of negative feedback, ADHD, depression, lack of motivation, lack of energy and sensation seeking. In conclusion, we must realise that procrastination is an emotion regulation problem rather than time management. The solution is not downloading multiple time management apps or watching motivational videos or constantly reading quotes, it is plainly managing emotions in a new way. To understand an abstract proposition, we have to simulate it and then take charge. To rewire our hard-wired habits, we need to provide our brain with BBO i.e. Bigger Better Offer. This means to simply reward yourself with something larger than the instant gratification that procrastination provides. If we could connect our current self with our future self in a better way, we need to muster up the motivation we need to accomplish the task NOW, and not THEN. If you are tempted to procrastinate, visualize your future self, and try to simulate yourself. Focus on the pain you would be feeling in future and then try to override it with the relief of a completed task.

No matter how simply we list down the ways to overcome procrastination, it still is deeply existential. It raises questions about how we want to spend our time as opposed to how we actually do, because in the end we just want to be happy with our choices.

 

[1] Harriott, J., and Ferrari, J. R. (1996). Prevalence of procrastination among samples of adults. Psychol. Rep. 78, 611–616. doi: 10.2466/pr0.1996.78.2.611

<https://journals.sagepub.com/doi/abs/10.2466/pr0.1996.78.2.611>

[2] Ferrari, J. R., O’Callaghan, J., and Newbegin, I. (2005). Prevalence of procrastination in the United States, United Kingdom, and Australia: arousal and avoidance delays among adults. North Am. J. Psychol. 7, 1–6.

<https://www.researchgate.net/profile/Joseph_Ferrari3/publication/276354186_Prevalence_of_Procrastination_in_the_United_States_United_Kingdom_and_Australia_Arousal_and_Avoidance_Delays_among_Adults/links/5557a6c108aeaaff3bf771c5.pdf>

[3] Onwuegbuzie, A. J. (2000). Academic procrastinators and perfectionistic tendencies among graduate students. J. Soc. Behav. Pers. 15, 103–109.

<https://search.proquest.com/openview/e6ab4c0fb9e8d3388a6b327330fce70a/1?pq-origsite=gscholar&cbl=1819046>

[4] Hal E. HERSHFIELD, ‘Increasing saving behavior through age processed renderings of the future self’

<https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3949005/ >

[5] https://www.merrilledge.com/

About the author

Dharini Shah is a is a second-year student of B.Sc. (Actuarial Science and Quantitative Finance) and an aspiring Actuary, with the expertise of two papers added to her quotient. She is an avid reader with a passion for penning down her thoughts, often as musings, poems or articles.