Tidying up, wiping, cleaning windows – almost 40 percent of Germans like to put these things off. But even when there are tasks pending that, if not done, will have a direct impact on their wallet, many are phlegmatic: almost a third of Germans like to put off filing their tax return, and 21 percent prefer to take care of their insurance later rather than sooner, as a Yougov survey commissioned by the insurance start-up Clark shows.
The phenomenon of procrastination, i.e. the postponement of unpleasant tasks, can cost you money when dealing with financial matters.
Why you keep putting off money issues
There are many reasons why people don’t tackle important issues like filing their taxes: It could be because they feel overwhelmed because the task seems too big or too complex, or maybe you’re trying to do too many things at once and getting bogged down.
But procrastination is only partly a time management problem. It is also a behavioral strategy to avoid negative emotions. People who habitually put off unpleasant tasks are likely to feel stress and anxiety and are prevented from tackling problems. This then leads to tasks being put off even further: a cycle that reinforces itself. To escape this, you should ask yourself why you are not tackling the financial issues you don’t like. Perhaps there are negative beliefs about dealing with money that are preventing you from doing so?
The most important argument for doing something about financial procrastination: Only when you have control over your finances can you achieve savings goals, build up an emergency fund or make provisions for the future. But to do this, you have to overcome doing nothing.
You are missing out on savings potential
According to the comparison portal Check24, around a third of Germans are too lazy to change their current account – around 76 percent of those who are reluctant to switch pay monthly fees for the account, even though a whole range of banks offer it free of charge and without conditions. 17 percent say that the change is simply too complicated for them.
Regularly checking long-term contracts, for example for a smartphone, electricity or insurance, is too much effort for many people. But the seemingly small savings add up. For example, a checking account: If you are with a bank that charges a monthly account management fee of 5 euros, you can save 60 euros per year by switching to a free account.
According to Check24, “record savings” are possible, especially with electricity and gas contracts. According to the report, gas customers can save an average of over 1,000 euros by switching providers. When concluding a new electricity contract, a family of four can reduce their bill by an average of 820 euros, and a single household by 237 euros.
There is even more money in the hated tax return: If you voluntarily file a tax return as an employee, you can expect an average refund of 1,095 euros.
You miss out on return opportunities
Those who have savings often park them without interest in their checking account or under their pillow as cash: According to a study by Postbank on the savings behavior of Germans, this is the case for almost a third of savers.
In doing so, you are missing out on the opportunity to earn a return on your savings. Simply by moving your money to a current or fixed-term deposit account, you can currently secure up to 3.7 percent interest per year.
The potential for returns is even greater if you venture onto the stock exchange floor. If you don’t want to spend all your time analyzing individual stocks or bonds, exchange-traded funds (ETFs) are a good way to invest money without a lot of effort. Historically, ETFs that replicate broad market indices such as the S&P 500 have achieved an average annual return of around 7 to 10 percent.
The sooner you start saving and investing, the greater the compound interest effect. For example, if you add interest to your savings account, you will receive interest on the interest in the future – so your assets will grow faster. If you invest in stocks or ETFs, you can reinvest the profits straight away – and slowly but surely increase your investment rate.
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Nevertheless, according to a 2018 study by the market research institute Sinus, around a third of Germans find it difficult to take care of their investments. A further 24 percent regularly fail to save money for their retirement.
The reluctance to invest is dangerous, especially in view of the financial gap in old age – something that almost half of people in Germany are aware of, according to a Civey survey. They even have a concrete idea of the extent of their own pension gap, with more than 25 percent of them estimating it at over 1,500 euros per month.
Nevertheless, young people in particular do not pay enough attention to the issue: two thirds of 18-29 year olds say they are not doing anything for their retirement other than their statutory pension.
How to escape the laziness trap
The most common reason for procrastination is a lack of motivation: 54 percent of those surveyed in the Sinus study simply cannot bring themselves to tackle the tasks. For 39 percent, dealing with the really important tasks is simply too exhausting or they don’t have the time (40 percent).
Around a third of those surveyed describe themselves as procrastinators – but the majority of them would like to change that. A few practical tips can help you to actually tackle your financial issues.
- Work on your mindset: You will only achieve real change if you enjoy tackling your financial issues, i.e. if “I have to do something” becomes “I want to do something”.
- Keep a financial diaryin which you document your financial decisions, but also your emotions at that time. This way you create a positive connection between your feelings and decisions.
- Simplify and break down tasks into smaller to-dos and set yourself intermediate goals with deadlines – this will help you better understand whether you are making progress towards a specific financial goal, such as saving for your dream vacation. Celebrating even the small successes will motivate you to achieve bigger goals too.
- Automate what is possiblefor example, by setting up automatic transfers for a monthly savings rate in a call money account. Investing can also be automated by setting up standing orders with a broker to buy ETFs or stocks. There you can then specify a specific amount that will be invested in an ETF savings plan, for example. Using a robo-advisor can also be a convenient choice for investing. The digital asset manager then selects suitable funds, stocks or index funds according to your specifications.
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