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Difficult times in the recession

A new concern in the post-recessionary market is financial procrastination. The economic downturn of 2008 and 2009 adversely affected the budgets of many people. Mary Casey, housewife in Los Angeles, California, said, “We were aggressive savers, but once my husband lost his job, we had to use every last resource we had to cover our expenses… it was either do that, or lose everything.” She isn’t alone, as many have foregone savings for survival.

The recession is over

Now that the recession is over, studies are showing many consumers fell into the category of abandoning their savings plan. Though it is understandable, financial experts are saying that there are serious repercussions of ending a savings initiative, even if it is only for a few months.

There is also another group of consumers who never began saving. They stave off saving for retirement completely due to several issues. Some claim that they never had enough of a reserve to start saving, while others claim that they prioritized more immediate financial needs over retirement. Despite the justification for financial procrastination, the results might be awful. These are some of the problems with financial procrastination.

Financial procrastination’s results

One of the biggest issues of financial procrastination is delaying investing. Delays in investing can end up costing consumers a lot of money. Consider, as an example, Mr. A and Mr. B who both began investing $ 2,000 per annum at 30 and 40 years of age, in an IRA. If the long-term average annual rate of return earned by both was 5%, when they turn 60, their financial outlooks will be drastically different. Mr. A would have about $ 132,800 saved, whereas Mr. B would only have $ 66,100. The difference is a startling $ 66,700. Of course part of the added return was the additional decade Mr. A had to invest, but the point is that procrastinating costs.

Another issue when it comes to financial procrastination is avoiding looking at personal finances. A person that has a savings plan likely did some research to set it up. A financial planner will do an intake interview for any investor. They will ask what goals the customer has, what their expenses are, what their revenues are, and delve into their long-term financial goals. Martin Laurel, financial planner in Dallas, Texas, said, “Some consumers are surprised at their financial position when they really take an honest look at it. It can be hard, but a solid plan and sticking to it is vital.”

Finally, people who procrastinate with their financial planning tend to also procrastinate with filing taxes. This is a critical mistake that can cost a consumer dearly. The IRS charges a monthly penalty of 5% of the tax payable for failure to file income tax returns by their due date, up to a maximum of 25%. That means that if someone has a tax balance of $ 5,000 and fails to pay it on time, the penalty would be $ 1,250, plus other interest and fees tacked on.

Commit to a financial plan

Though it’s easy to fall into financial procrastination, it is also dangerous. For consumers who have agendas and goals, even a small lag in saving can throw their plans off and they may never fully recover. For anyone who wants a healthy financial future, it’s best to come up with a plan and then stick to it, regardless of the fluctuations in the market.

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