Procrastination -Part 2 (How it Helps You, Financially)
Part 1 of this series, we looked at a few ways that procrastination hurts you, financially. The article brought out how companies make seemingly great offers to lure you in and then bite you in the end- especially if you are given to procrastination. Today we’ll look at a few ways procrastination can work for you.
Auto-enrollment in Pension Plan
There used to be a time when everyone had to auto-enroll in a company’s pension plan. When I started work with my current employer, I felt like I couldn’t afford to participate in the pension plan the way I wanted to, so I started with the minimum (1%). At least I could benefit from the employer match program a little bit. They would match $1 for $1.
Many people, who feel like they either can’t afford to participate or would rather have that money right now, don’t sign up for their employer pension plan at all- even if their company has a match program. They are throwing away thousands or tens of thousands of dollars, by not participating.
Legislation changed years ago, to allow certain employer to auto-enroll employees into their company’s pension plan. I attended a new employee orientation and realized my company had started doing that. Employees no longer opted-into the plan but had to opt-out. The more financially savvy me, understood what was going on. They were/are helping us to help ourselves.
The sad reality is many people show up to retirement with no savings and no pension- completely dependent on Social Security payments or some other government assistance. So, companies are incentivized to come up with ways to increase employee participation in their pension program. It used to be that employers assumed the employer match program was enough to do that. But it hasn’t been bringing in the amount of participation they had hoped. Now, many employers are auto-enrolling with the option to opt-out. They are banking on the tendency for people to procrastinate and just not take any action to disenroll, and that proved to be the case.
A Vanguard study of companies that auto-enrolled new employees into their company’s pension plan and required employees take an action to opt out, showed most employees did not opt out. Most remained enrolled. In fact, there was a participation rate of 91% for auto-enrollees as compared to 28% for voluntary enrollees. Participating employers have a fixed auto-enrollment amount and a minimum and max match amount- but the match amounts didn’t appear to make much difference for how many auto-enrollees stayed for that three-year period (the length of the study).
Lesson for you? If your company auto-enrolls you, do nothing and you will continue in the pension plan with the employer match- at least at the base amount. Here, your procrastination is helping you- at least at a base level. When you are financially able to do so, you should max the match and get all the free money you can. Of course, that takes action.
Payroll Deductions and Auto-transfers
This is not a completely hands off idea, but I thought it was worth mentioning. I am an advocate for automating your
finances- setting it and forgetting it. Take one day and setup your paycheck to be distributed to different accounts for different purposes- at least one account being a savings account. Let your allotments deposit into your dedicated savings account and just check in every now and then. It hands off. As you see the balance grow, hopefully that will serve as an incentive to continue leaving it alone. Don’t go fiddling with it; let those monies grow. Let your procrastination work for you.
Mike’s Story
I know someone who paid off his car loan at the credit union and continued to make payments into his savings account well after the car loan was paid off. Let’s call him Mike. The way Mike looked at it, he was already used to living on the lesser amount. Years later, when it came time to buy another vehicle, he had thousands of dollars he would otherwise not have had if he increased his expenses once the initial car loan was paid off.
Mike wasn’t/isn’t a procrastinator- just intentional- but even those who are procrastinators can take a lesson from him. Systems in place, like paycheck allotments into accounts can continue well beyond your initial goal. Maintain your expense level and let that money keep going to the bank. When a need comes up or when you are ready for long term investing, you won’t be starting from scratch. You let your inaction or procrastination work for you.
Slow to Spend
This is another way procrastination can work for you. Whether you are frugal or just slow to decide, you very likely spend less than those who impulsively buy now and think about it later. Spending less money is a trait of financially savvy people. If, however, you are an impulse spender, you aren’t alone. Many people are.
You can develop the habit of putting off purchase for the next couple of days or until the following week, and that can work to your benefit. It may be just the amount of time you need to ride out that impulse buy. The bigger the purchase the longer you may have to put off buying. Just tell yourself, you’ll make a decision in a couple of days. It may not work every time, but chances are, it’s going to work sometimes. It’s another case of using procrastination to your benefit. Beware of deals that make you feel like you have to buy now, or you will miss out on some once in a lifetime offer. Chose not to decide to buy yet. Put it off. If you are on a definite financial plan, that will help as well.
Conclusion
If you are not a highly disciplined person, don’t’ use that as an excuse not to leverage all the tools at your disposal. It basically boils down to at least these two things. One, don’t stop the positive systems that are already in place (like an auto-enrollment into your employer’s pension plan). Let them do what they do. When you’re ready to be more intentional, you can ramp things up.
Two, automate a few processes that you can almost set and forget. One of those things can be setting the automatic increase of your pension contribution each time you get a raise. So as your salary rises, your contribution amount and employer’s contribution will rise. Additionally, you could stash cash away before you get your net check through your payroll allotment program. That will increase your chance of being successful saving. Use these ideas and any others that come to mind.
These (as all my posts) are intended for educational purposes.
