Procrastination and its Financial Risks

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Procrastination is defined by the action of delaying or postponing something. Since immemorial times, humankind had been struggling with this issue. We tend to procrastinate even on important matters that are undoubtedly beneficial to us.

When it comes to being healthy for example, it is common knowledge that regular exercise and healthy eating play a crucial role. Nevertheless, we put off our New Year resolution to work-out at the gym yet again, or still eat fast-food for lunch and/or dinner on a regular basis.

Behavioural research refers to this tendency as “time inconsistency”.

Our bias incline to put more value on immediate rewards rather than the long-term ones.

Being fit, lean and healthy, could be an example of a ‘future-self’. This long-term benefit, however, might be months or years away. It is far easier to be indulged in a ‘present-self’ as we would not become obese or get diabetes overnight.

Thus, while we could easily visualise the benefits of taking certain actions, the results of the ‘future-self’ project are much harder to see. This often explains why we would rather procrastinate and choose immediate gratification.

Unfortunately, while procrastinations occur in all facets of life, some of the consequences are ignorable. the implications of financial procrastination, however, are too dire to be left to chance.

As a result, there is a lesson we can glean from the story of Prophet Joseph who interpreted the King of Egypt’s dream:

“Joseph,” [he said], “O truthful one, give us your opinion concerning seven fat cows who are eaten by seven lean ones, and seven green ears and [seven] others dry, that I may return to the people so that they may know [the truth of the matter].” He said, “You will sow for seven consecutive years. Then leave in the ear whatever [grain] you harvest, except a little that you eat.

Then after that, there will come seven hard years which will eat up whatever you have set aside for them —all except a little which you preserve [for seed]. Then after that, there will come a year wherein the people will be granted relief and provided with rains therein. [Quran 12:46-49]

The most obvious financial lesson would be that we should always save before we spend. Savings should also be done consistently until the amount is enough to function as an emergency fund in the face of misfortune.

Additionally, we can also deduce that as life may throw us some curveballs, we should at least plan to manage and mitigate key risks such as severe illness, house-fire or landslide.

Financial industries offer Takaful (Islamic insurance) as the mechanism for risk-sharing. Unfortunately, according to a report from the Bank Negara, only 41% of Malaysians have an insurance policy or family Takaful certificate.

While public-healthcare in Malaysia is at a good level, there are issues with overcrowding causing long periods of waiting. For a husband,  death without coverage would mean that the spouse and children not only have to deal with the emotional strain, they may also have to face a much bleaker financial situation.

Finally, the financial implications of disability can be far more devastating than premature death. Setting aside the loss of an ability to earn additional expenses for healthcare, the probability of having a disability is higher than that of death for any age below 55.

In such a scenario, procrastination can be extremely harmful in regards to coverage so don’t leave things up to chance, be insured.

 

Sources:

Economics, B., & Inconsistency, T. (2018). Time Inconsistency | Intelligent Economist. Retrieved 14 February 2020, from https://www.intelligenteconomist.com/time-inconsistency/

Two Harvard Professors Reveal Why We Procrastinate. (2015).

Retrieved 14 February 2020, from https://jamesclear.com/time-inconsistency

The Quran. Retrieved 14 February 2020, from https://al-quran.info/#12