Procrastination can be a significant obstacle to achieving our financial goals. Many of us understand the importance of investing for our future, yet we often find ourselves putting off taking that crucial first step. This article delves into the reasons behind investment procrastination and provides practical strategies to overcome these barriers, helping you embark on your journey towards financial success.
Investment procrastination is a common phenomenon that affects individuals across all income levels and age groups. It's not simply a matter of laziness or poor time management; rather, it's deeply rooted in our psychology and emotions surrounding money and financial decision-making.
As Marcus Lee points out, "We all know and struggle with procrastination, whether it's completing a work assignment, getting around to cleaning the house, or even starting our investing journey."
Understanding the underlying causes of investment procrastination is crucial for developing effective strategies to overcome it. Let's explore the main reasons why we tend to put off investing and how we can address each one.
Fear of Losing Money: The Loss Aversion Trap
One of the primary reasons people procrastinate when it comes to investing is the fear of losing money. This psychological phenomenon, known as loss aversion, is a powerful force that can paralyze our decision-making process.
Lee explains, "A major reason we put off investing is because we're afraid of losing money. This is known as loss aversion, a cognitive bias in which we tend to prefer avoiding losses, even if it means giving up the potential for gains."
Overcoming Loss Aversion
To combat loss aversion and start your investment journey, consider the following strategies:
Reframe your perspective: Instead of focusing on potential losses, think about the opportunity cost of not investing. Lee suggests, "Try reframing your thoughts about investing from 'I'm afraid of losing money' to 'Here's how much I might lose out on if I don't invest'."
Understand the power of compound interest: Recognize that by not investing, you're potentially missing out on significant long-term gains. For example, "Had you invested in the S&P 500 10 years ago, you would have gained 13.81% in annualised returns today. That means if you invested RM1,000 in the S&P 500 10 years ago, you'd have RM3,645.90 today."
Consider the impact of inflation: Remember that keeping your money in cash isn't risk-free either. As Lee points out, "Inflation erodes the purchasing power of your savings; RM100 in cash 10 years would be worth less today because RM100 can't buy you as many things today as it can 10 years ago."
The Knowledge Gap: Feeling Unprepared to Invest
Another common reason for investment procrastination is the belief that we don't know enough to start investing. This perfectionist mentality can lead to analysis paralysis, where we continuously delay taking action in pursuit of more information.
Strategies to Overcome the Knowledge Gap
Start small: Begin with low-stakes investments to build confidence and experience. As Timothy Pychyl suggests in his book "Solving the Procrastination Puzzle," adopt the slogan "Just start it!"
Embrace continuous learning: Recognize that you don't need to be an expert to start investing. You can learn as you go and adjust your strategy over time.
Utilize educational resources: Take advantage of free online courses, financial blogs, and investment apps that offer educational content to improve your financial literacy.
Emotional Barriers: Confronting Financial Anxiety
Emotions play a significant role in our financial decision-making process. Many people procrastinate on investing due to underlying anxiety, fear, or doubt about money-related matters.
Lee notes, "According to 'Procrastination, Health, and Well-Being', we sometimes put off carrying out a task because we have strong negative emotions associated with that task."
Overcoming Emotional Barriers
Acknowledge your emotions: Recognize and accept that it's normal to feel anxious about money and investing. This awareness is the first step towards overcoming procrastination.
Seek support: Enlist the help of a friend or family member to keep you accountable. Lee suggests, "If you're putting off opening your brokerage account, call up a friend and go down to the bank to open your brokerage account together."
Automate your investments: Set up automatic transfers to your investment account to reduce the emotional burden of making regular investment decisions.
Taking Action: Practical Steps to Start Investing
Now that we've addressed the main reasons for investment procrastination, it's time to take action. Here are some practical steps to help you start your investment journey:
Invest with a robo-advisor: Lee recommends, "Have a smartphone? Head to the app store and download a robo-advisor. The Securities Commission's page lists all the licensed Digital Investment Managers in Malaysia. With a robo-advisor you can start passive investing with only RM100."
Consult a financial advisor: A professional can help you create a personalized investment strategy based on your risk profile and financial goals.
Open a brokerage account: For those ready to invest directly in the stock market, Lee suggests, "You can open a Central Depository System (CDS) account to start investing directly in Bursa Malaysia."
Remember, the key to overcoming investment procrastination is to take that first step, no matter how small. As you gain confidence and experience, you can gradually increase your investment knowledge and portfolio.
Investment procrastination is a common challenge that can significantly impact our long-term financial well-being. By understanding the psychological and emotional barriers that lead to procrastination, we can develop effective strategies to overcome them.
Whether it's reframing our perspective on risk, starting small to build confidence, or seeking support to address financial anxiety, there are numerous ways to conquer investment procrastination. The most important thing is to take action and start your investment journey today.
Remember, as Marcus Lee wisely states, "It may have been a difficult first step to make, but once you do it, you'll not regret starting your investing journey." Your future self will thank you for the financial growth and security that comes from overcoming procrastination and embracing the world of investing.
