Why do people procrastinate when it comes to saving a deposit or investing in property?
Intellectually, I suspect that most people know they should invest, but most people make very poor plans for their financial futures, if they even plan at all.
Here are a few of the reasons why people delay investing:
1. Fear of failure
It is human nature to have a fear of the unknown, and for many people, investment is an unknown quantity.
Many people are afraid of investing for fear of losing substantial amounts of money, or worse, being conned out of it.
This is natural, as none of us wants to lose what we have worked hard for, or appear foolish.
The fear comes from a lack of clear understanding of the risks of investing.
Fortunately, there are easy ways to begin investing in a low-risk manner with little or no risk of loss of capital.
Then, as you learn more, you may begin to feel comfortable taking on more risk.
2. Impossibly disorganised
We probably all know people who are totally disorganised, seem incapable of arranging their affairs and never look at their bank statements.
They often appear to be busy or scatterbrained people with a short attention span and no appetite for detail.
There can be any number of causes, such as stressful jobs, addictions or relationship problems, but these are habits that can potentially be ‘un-learned’ relatively quickly.
Generally, people are not keen to look at bills, credit card statements and bank statements because they fear that they will bring only bad news.
However, not looking at them will not improve the news they bring.
The good news is that once you begin to take your finances more seriously, looking at bank statements and investment accounts automatically begins to bring you pleasure rather than pain.
3. ‘Doing fine’
This is perhaps the most common thing I see in young professionals of today: an attitude that they don’t really need to invest because they are earning a good salary and intend to earn a higher salary in the future.
I believe that this attitude partly comes from a misunderstanding of how wealth is created.
Many of us have been taught to work as hard as we can and earn the highest salary we can get, but the taxation system is loaded against us achieving wealth in this manner.
How many people do you know who spend every dollar they earn, and sometimes more?
A fair few, I expect.
There is a dangerous tendency towards consumerism in the modern world.
Too many of us believe that money should be earned and then spent on depreciating assets such as cars, big televisions and other toys.
While these items give the impression of wealth, they do not create wealth.
Instead, they destroy it.
Sometimes, it seems that people feel rich if they have a large amount of cash in their pocket.
The problem with this is that cash in the pocket tends to get spent unwisely.
4. Marital disagreements
Money and finances cause a huge amount of tension in some marriages, particularly where spouses have different attitudes, risk profiles and priorities in life.
When it comes to investing, it is certain that you and your spouse will have a different attitude to risk, because every person is different.
This can be problematic where one party has a very strong aversion to risk and the other is naturally a gambler or drawn to high-risk investments.
The solution to this situation is to be open, discuss an agreed plan of action and stick to the agreed plan.
5. Feel too incompetent
This is related to the fear of failing, and the remedy is education. Generally, in life, people feel afraid or nervous when they do not know what they are doing.
Therefore, by educating yourself, the fear and feelings of incompetence will diminish.
6. Inability to face serious issues
As we have noted, many people do not have a written will, and this is indicative of an unwillingness to confront serious issues such as financial welfare, retirement and death.
Many people, therefore, adopt an attitude of living for the day and relieving stress through impulsive spending, known as retail therapy.
While there is a tendency for peers to admire such a carefree attitude, it is not smart to fail to plan for your future.
7. ‘Can’t afford it’
There is sometimes a misconception that it takes a lot of money to start investing, but it definitely does not.
We can begin to make a difference to our finances today through cutting down on expenditure and saving a small pool of cash, perhaps in a separate bank account.
This is a good way to start – simply by reducing consumer debt and saving a small pool of funds.
It really does not take much capital per month to begin an investment plan, so please do not be misled into believing that it does.