Procrastination: “refers to the act of replacing high-priority actions with tasks of low-priority, and thus putting off important tasks to a later time”1.
A major part of our role as advisors is to educate our clients. However, we also act as coaches and counsellors. Education is not always enough – we have to discourage procrastination. So it was with interest that I watched a video with David Laibson, professor of economics at Harvard, entitled the Biggest Mistake of Financial Planning: Procrastination.
The piece deals with our tendency to procrastinate or choose immediate reward rather than longer term benefit. For example, if you are asked what you would like for a snack next week, fruit or chocolate, what would you chose? Many people will chose fruit, intending to eat healthily. Now imagine that it’s a week later, you are advised that your choice was mislaid and you have to decide what you want right now. Will you choose fruit or chocolate? If you chose chocolate, you would be with the majority!
We have a “present bias” - we weight the present more fully than the future. So if we put something off today, we believe it will be psychologically “cheaper” to do it in the future.
Our annual tax returns have a deadline, so we usually get to this task to avoid the penalties associated with late filing – thus imposing commitment to the task. But what of those tasks that don’t have a deadline – signing a new will, setting up a savings plan, defining your investment objectives, reviewing your insurance, looking at retirement planning...
Academics, including Laibson, have researched present-biased preferences and the impact on specific portions of the brain2. There is a theory that patience or impatience arises from the interplay of emotional and cognitive processes. We have a cool, reasoning system, which is deliberate, rule-governed and non-emotional. On the other hand, we have a hot system which is fast and automatic. The hot system often over-rules the cool system, particularly in making decisions in the here and now.
Studies have then gone on to look at the inter-play of the activation of the two neural systems when the “reward” is for someone else. Decisions for others have less emotional involvement. Consequently, there is no personal reward expectation and an immediate rather than a delayed option can be more readily handled by the cool system. It is easier to maintain a commitment when we are not as emotionally involved.
Here’s where we come in. Through our work with our clients, we learn of the things on their financial “to do” list that never seem to get done. We volunteer to become a thorn in their side until they get the job done (often with our help), or tell us to get lost! We’d be pleased to help you complete the items on your financial “to do” list.
Albrecht, Konstanze, David I. Laibson, Matthias Sutter, Kirsten G. Volz, D. Yves von Cramon. 2011. What is for me is not for you: brain correlates of intertemporal choice for self and other Social Cognitive and Affective Neuroscience. Social Cognitive and Affective Neuroscience. Vol. 19, No. R1.