What Does Procrastination Really Cost Comments41 Comments

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Not Now

How many times have you heard it: “You have to invest!”
What has your response been? If you’ve ever said something like: “Sure… just not now,” you’re with me. I said that for many years. Most people probably don’t say it out loud, but their actions (you know, those things that speak louder than words) do their speaking for them.

Why do we procrastinate? How does this play out in our brains? We say something like “I know I have to brush my teeth, but I’ll get caught up tomorrow. One day (or month or year) isn’t going to make a difference. Just leave me alone!”

Others have a vague sense of “Enough already with the guilt trips! I’m an adult, I can figure these things out. Back off!”


Whatever the actual concepts that churn in the nether regions of our consciences, they all have this in common: “Why do I REALLY have to do it? Can’t it wait one more year? Is it really going to make that much of a difference? I mean, really?”

Every procrastinator ends up there in one way or another. And underlying every decision to procrastinate is the fundamental equation: “The pain tomorrow will be less than the pain today. So I prefer the less pain of tomorrow to the more pain of today.”

That Much Difference?

Will postponing your investing really make that much difference? Let’s see. Let’s use a well-known chart as our illustration:

Bite the Bullet Investing charts copyright

What this chart shows is the miracle of compounding: if you earn x% per year and keep reinvesting the earnings (interest, dividends, rent, or whatever the income is) those earnings will grow bigger and bigger every year. Why? Because the pot earning the return grows bigger each year by that year’s return.

Is this important? It is for Warren Buffett, if that’s any indication. He is all about the miracle of compounding.

For most investors (including you) the chart will look something like this over your life. The exact numbers don’t matter; for every investor they’ll be different. It’s the overall shape that’s important, and (barring withdrawals and recessions) the value of your investments will look something like this chart.

The Big Payoff

Okay, quick: which year on the chart has the biggest growth? Right, the final year (whichever year that happens to be).

Which year has the second best return? The penultimate year, of course. Now, which year will have the smallest return? The first year, not surprisingly.

As you progress in time, each year’s earnings will be bigger, because it’s earned on a progressively bigger base.

In other words:

Look at the different gains in early vs. later years

When you look at the chart, note the following:

  • The growth in the first five or so years is negligible compared to the final few years.
  • The real growth happens at the end
  • You can’t judge the eventual size of the pot by the growth of the first few years

But the final few years wouldn’t look so good if the first few years weren’t there.

Now, Procrastinate

Let’s look at that previous statement a little deeper. What happens if you procrastinate, and wait, say, five years before investing?

You know you’re going to make less, that much is obvious. But how much less?

Your first instinct might be that the returns in the first few years are trivial anyway, so it can’t be too much of a loss, can it?

Let’s see how that thought looks on the chart:

What you THINK you're foregoing by waiting 5 years to begin investing
It’s so small, you wouldn’t even see it if it wasn’t highlighted… right?


The Truth

You can never get a return on nothing, so the beginning will always be the beginning — nothing you do can change that.

The only thing you can change is the ending. With five fewer years to earn a return, procrastination will cost you the LAST five years of growth:

What you think vs. reality

Is there a difference between the growth of the last 5 years vs. the first 5 years? Yes. It’s huge!

That’s the growth you lose by procrastinating!

The five best years of your investment’s growth will always be the last five years. And those are the years you lose by waiting to get started. It could be as much as half the total return over the life of your investment! It’s that significant.

Bite the Bullet and start investing now

When I learned this I could not help smacking myself on the head. It’s so obvious, but nobody told me this before. (What can I say, nobody ever accused me of being the brightest bulb on the Christmas tree; I need to be told even obvious things.)

They say we learn from our mistakes, but a smart person learns from another’s mistakes.

Start By Just Learning

Now that you know the true price of procrastination (the best years of your own net worth) you know what to do. Bite the bullet and get started.

Investing is like an airliner: before it takes off there’s a lot of work to do on the ground. Then it needs to rumble down the taxiway to the end of the runway. Only then can it open the throttles and gather speed before actually taking off toward its destination.

Getting started in investing is much the same. There’s a lot you can learn before you need to invest your first dollar.

That’s good news, because nothing stops you from biting the bullet and starting the learning process now. There are many free resources on the internet. There’s no one best way to road map the learning path — everyone operates differently. Just start somewhere and keep following your nose.

The important thing is not how you start, but that you start. It will come to you as you go along. Just begin.

Author Bio: William Cowie learned the hard way how much it costs to procrastinate. He blogs about investing, and offers a free Investing Basics into at Bite the Bullet Investing.

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By : Adam | 26 Apr 2013
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41 thoughts on “What Does Procrastination Really Cost

  1. John S @ Frugal Rules

    Good post William! I like to say that time is the greenhouse to your investment dollars. Time is such a massive part of investing and it’s sad that so many miss that. I know that I did and I wish I could go back to my younger self and shake him. You’re dead on though, so much of this starts with education.

  2. writing2reality

    Time is your greatest asset. Enough said.

    William, I think the visuals on your post truely exemplify the point. It is visually startling to see so much wealth and growth disappear. If only the message of how time is truly valued was understood by those with the time and ability to invest.

  3. Evan

    Time is money when decisions have to be made and actions taken with gard to your personal finances and investments. In this regard, prompt action needs to replace financial procrastination, since the costs associated with the latter can be very steep.

  4. Edward Antrobus

    To play devil’s advocate, I would like to say that the absolute first step should be to determine how much money you actually need.
    I’ve determined that my number us roughly a million dollars 40 years from now. And that’s assuming that social security is gone by then.
    Based on that, I do need to step up my game a bit (but for now, I’m getting a better return paying off deft). But getting started a decade late isn’t going to hurt too much.

    1. william

      you’re right to set a goal. However, it’s easy to use THAT to rationalize procrastinating. Don’t ask me how I know that! :)

  5. Nick @ ayoungpro.com

    Great breakdown of how to use time for your advantage William! I remember seeing similar graphs in my early twenties and they are really what led me to start getting a hold on my personal finances. I figured that since I was still young I really needed to be taking advantage of the extra investing time I had!

    1. William

      Thanks, Nick. Like I said above, my only regret is that I never saw stuff like this when I was young. Heck, they didn’t even have the Internet when I was young… :)

  6. Janice @ Whiz Silver

    The 2 intertwining factors. Time and money. I used to procrastinate a lot in my adolescent years and in investing I know I can never procrastinate. Great charts to portray the opportunity cost of procrastination.

  7. Grayson @ Debt Roundup

    Nice write up William. I can say that I procrastinated, but in actuality, I just used my money for another purpose and that was to get out of debt. I am behind on my investments and I will never truly be able to make up for that lost time. That is the power of compounding!

    1. William

      Thanks, Grayson. I was fortunate to get caught up by applying a few other principles not mentioned in this post. If you want more info, contact me off-line :)

  8. Shannon @ The Heavy Purse

    Great post, William. Excellent demonstration of the power of compounding. And I think you’re right – most people who delay investing don’t think about it correctly. They don’t realize it’s those later and most productive years they lose. Good reason to start investing as soon as possible – even if it’s just a small amount at first.

  9. Pauline

    great charts! as a true procrastinator, I have procrastinated on everything but money, the stakes are too high, and it would be too much effort to do it later.

  10. Megan

    Made us realize that time is indeed an asset when it comes to investing. You need to jump right on it if you don’t want to miss your deadline.

    1. Jeremy

      For sure, time can make a big difference to how much return you will get. Wait too long and you might be paying much higher for that investment and there will be less time to compound interest.

  11. Kim@Eyesonthedollar

    I’m always amazed by the power of compound interest. Makes me wish I’d started in kindergarten. We’ve actually set up a small account for my daughter who is in kindergarten. Even if we never add to it, it should be a nice addition to whatever she decides to invest on her own as an adult.

    1. Jeremy

      It is something that is tough to appreciate unless you actually see the numbers of what it can achieve. Smart idea to start saving early for your daughter.

  12. Cat Alford (@BudgetBlonde)

    Nice post – very inspirational! :) After looking at a similar chart, I promised myself that I’d start an IRA this year, before I turned 26. Happy to say that I started the IRA in January, and I’ll turn 26 next month. :) It’s not much and it’s my only form of retirement savings since my employer doesn’t offer a 401k, but it’s something, and every little bit helps, right?

    1. Jeremy

      Good job Cat. I’m in the same boat as my employer doesn’t offer any kind of retirement savings plan. Every bit certainly does help, especially if you start early and keep contributing over time.

  13. Darren

    When I look at the graphs I’m thinking in terms of the investment in my own skills and knowledge. I’m not particularly thinking of becoming the next Berkshire Hathaway but I understand the compounding principle in one’s personal development.

    1. Jeremy

      Interesting take Darren. I’d agree that investing in yourself would have similar exponential growth over time. As you learn more and gain more skills, picking up new skills and knowledge just gets easier and easier.

  14. AverageJoe

    Great job on building an argument against procrastination. I always ran into another one: procrastination disguised as “I have just one other thing I have to do first, then I’ll start saving.” People don’t even recognize it as procrastination, they see it as a matter of (misguided) priorities.

    1. Jeremy

      I’m actually at a period of procrastination like that right now, but I wouldn’t say it’s misguided priorities in my case. I just need to put my money into a condo down-payment first. Then when I know how much extra cash I can put towards investing I can get more aggressive there.

    1. Jeremy

      I agree that the visuals do really help make his point. It gives a much clearer picture of what you’d be missing out due to procrastination.

  15. Jeremy Norton

    Procrastination is something we do sometimes, and some even most of the time and I am no exception to this. I know this is one bad habit and that I should be doing something to change this. I have earned my lesson pretty well also because of this. I often regret at the end of the day that I should have been more productive.

    1. Jeremy

      It’s been a bad habit of mine for a long time. Why do something now when you can justify leaving it for the last minute? :)
      When it comes to investing, it is something that really should be avoided if you want to achieve maximum returns.

  16. Zimmy

    A few years ago I had to cash in a structured retirement account from my previous employer that had a guaranteed 7% yearly interest rate as per state law. It was worth almost 55k and would have paid a substantial amount of monthly income when I was retired. I am now playing catch up with my savings. If anyone out there is in the same predicament, you should exhaust all available options before cashing in your retirement account(s).

    1. Jeremy

      Very true Zimmy. You do want to avoid dipping into retirement savings at all costs. Trying to refill that retirement account and make up for lost interest is an uphill battle.

  17. RoyT

    I am in general agreement that procrastination can have a negative affect on your finances. As a former finance professional I would certainly never deny the attractions of compounding over time. However a desire NOT to procrastinate should never take precedence over a sensible decision to delay an investment decision. There are always times when, in the financial markets, it makes sense to stand to one side and observe rather than feel obliged to “do” something.

    1. Jeremy

      Good point Roy. With investments there can be good times when you shouldn’t rush into an investment. Good timing is better than just buying as soon as possible.

      1. William Cowie

        I would argue that if your investment takes the form of a monthly contribution, there is no bad time to invest. If the market is down, you rub your hands with glee, because you’re buying cheap. This is a long term, 20 years for instance, deal.

        With a lump sum investment, you’re right, it pays to watch and be careful. With a monthly contribution, earlier is better, regardless.


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