Do you procrastinate about taking care of financial matters in your life? Recently a fascinating article about financial procrastination appeared online. The author publicly admitted that “after years of procrastinating,” he finally logged on to his retirement account. It took him years to get around to dealing with it because the entire task made him anxious.
Moreover, he stated he didn’t remember his password, and his account choices were a mess. For many of us there is nothing special about any of this. Most people dread and put off dealing with financial matters. However, what was astonishing about this story is that the writer is an eminent economist who does research in personal financial matters such as savings, annuities and mortgages. If this man has trouble dealing with his retirement accounts, is there any hope for the rest of us?
Do you have to be smart to be rich?
There are many reasons people procrastinate on dealing with financial matters. There is even a new special field in psychiatry that deals with the issues people have surrounding money, spending and saving. Unfortunately, while many of us have issues about money, the specialized help that is available is primarily useful for people with lots of wealth or income.
Some of my research can help people who procrastinate about dealing with their finances. One reason many people don’t want to deal with money issues is because they think they are not smart enough. However, when I looked into this, the results were very clear: there is no relationship between intelligence, measured by IQ, and a person’s wealth. It’s generally true that the smarter you are, the more income you earn. However, earning more doesn’t give you any special advantage in saving or building wealth.
Sendhil Mullainathan, the economist who wrote the column on procrastinating, appears to be a poster child for the lack of a relationship between IQ and wealth. He is clearly very smart: he won a MacArthur genius award and is a full professor at Harvard.
But he probably doesn’t have much wealth since he states in the article, “I want to reach my retirement with a nest egg that allows me to maintain my current lifestyle and to travel a bit.” Rich people don’t dream of retiring with just enough money to take a few trips.
If you are putting off dealing with money issues because you don’t think you are smart enough, don’t wait any longer. Being smart isn’t going to make you rich. Whether you are dumb or smart you can save. The secret is simple: just spend less than you earn.
Are you richer than you think?
Many people don’t want to deal with their financial issues because they expect the news to be depressing. Most of us are experts at avoiding bad news. However, another research paper I wrote shows that for most people, the financial news is actually much better than expected, which is perhaps another reason not to procrastinate.
The National Longitudinal Surveys, a long-running research project sponsored by the Bureau of Labor Statistics, asked people to estimate their net worth. Then the survey took them step by step through the value of all of their assets and the value of all their debts. From this information I was able to calculate their actual net worth. The result for most people was much better than they feared. For every dollar of wealth actually held, the typical individual believed they only had 62 cents.
In simple terms, the research showed that the typical person underestimates their financial position by more than a third. The financial unknown is scary but the actuality for most people is not as frightening as they fear.
I encourage all of you to sit down, close your eyes and ask yourself: are we in debt, break even or do we have money? Write down your best guess for how much you are in debt or how wealthy you are. Then add up all of your assets and subtract all of your debts (an easy online calculator is available here). The results will pleasantly surprise most of you.
Why should you avoid procrastination?
Research suggests people who avoid procrastinating do financially better. A recent working paper by two economists Jeffrey Brown and Alessandro Previtero shows that people who procrastinate are less likely to participate in savings plans, take longer to sign up when they do decide to participate, and contribute less money to their retirement plans than non procrastinators.
You will not become rich or suddenly have enough money to retire by reading just one article. However, know that lots of people procrastinate about financial matters. If you have been procrastinating because you don’t think you are smart enough or because you fear the results, research suggests you will find the news is not bad.
So make that first step and try to deal with that financial task you have been putting off. It is like jumping into a pool, lake or ocean; the water is really not as bad as you fear, and taking the jump will likely make you (feel) richer.
This post was also published at “The Conversation” under my column the “Eclectic Economist” and can be found here.
One thought on “Why you shouldn’t fear your finances (you’re probably richer than you think)”
یکی از اصلی ترین نگرانی ها در صنعت تصفیه آب، وجود ذرات معلق کلوئیدی با بارهای منفی می باشند که ته نشین نشده و جمع آوری آنها با چالش های زیادی مواجه میشود. کربن اکتیو به نوع خاصی از کربن تولید شده از استخوان و چوب گردو و سایر درختان گفته میشود که در کوره های مخصوص حرارت دهی شده و پس از تماس با مواد شیمیایی، سطح متخلخل با قدرت واکنش پذیری بالایی پیدا می کند. پس از طی روند تولید و حرارت دهی اصطلاحا کربن فعال بوجود می آید و قدرت واکنش پذیری و جذب یون با بار منفی در آن بسیار زیاد است.
راهنمای خرید کربن اکتیو
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