Procrastination Nation

We’re all guilty of it to some degree. It’s not a new phenomenon that we can blame on any new invention or distraction. A seemingly natural human condition, it is of course, procrastination.

As a nation, and as individuals, we often put off the tasks that we find less appealing or difficult until such time as they can no longer be put off. In many cases this is harmless, but there are certain issues where time is of the essence. Any delays in addressing these issues can, and will, cause greater pain than facing them head-on as soon as possible.

Financial issues are clearly ones that should be addressed sooner, rather than later. Right now there is no shortage of examples that illustrate, often painfully, the effects of delaying critical financial decision making until it is too late to make them without drastic changes.

Greece is a recent example of a nation imperiled by ignoring its financial crisis rather than looking at it realistically and taking steps to correct it. Had reforms taken place earlier, they could have been spread more evenly over time and draconian cuts to salaries and services would be tempered somewhat. Financial mismanagement is not limited to far-away lands though. There are plenty of examples in our own country.

Let’s look at the case of the city of Detroit, which recently had Kevyn Orr appointed Emergency Manager. In a report scheduled to be released today (May 13^th) Mr. Orr states that the one-time Arsenal of Democracy  "spends more than it takes in” and “is clearly insolvent on a cash-flow basis."

Detroit is by no means the only example we have to look towards. We can look back at the most recent recession and housing bust and see that individuals, like the leaders of our cities and countries, are also capable of making poor financial choices. We spent too much on houses, and stretched our credit cards expecting good times to continue indefinitely and get even better. Then, we paid for it.

Right now our country is facing a problem that our elected officials don’t want to address. They want to avoid it all costs because it’s not a popular topic. It won’t generate any headlines for them, and if it does they won’t be positive. And, however the issue is handled it is bound to upset certain groups that they may be counting on for votes. This issue is Social Security.

For better or worse, Social Security seems here to stay. We are not going to argue its merits or its drawbacks. We will, however, argue that if we are to keep such a system, drastic reform needs to take place. As a working American you pay into the Social Security system with every paycheck. You may expect there to be a file with your name on it somewhere in Washington that shows how much was paid in and what you stand to get back out when you reach retirement age.

There is in fact no such file. Moreover there is nothing in the Social Security account other than an IOU from our government. You see, the money you’ve paid in has already been spent. Without addressing the key problem; spending more than is coming in, Social Security will face harder decisions and deeper cuts in the future.  But twenty years from now it will be impossible to go back in time to fix things before they got really out of hand, just ask Mr. Orr and the city of Detroit.

While the actions of our elected officials are somewhat out of our hands (we can beg and plead but we can’t force them to take action), we can take steps to ensure our own retirement and that includes saving enough, not taking on too much risk or debt and most importantly starting early.

While procrastination isn’t a new problem, it is rarely a solution. I leave you with two quotes from the early days or our republic. Which one you choose to follow will likely have a significant impact your financial future.

"Never put off for tomorrow what you can do today." – Thomas Jefferson

“Never do today what you can put off till tomorrow.” – Aaron Burr

About the author: Michael Prus is the President and Founder of Scale Investment Group, LLC, a registered investment advisory firm with offices in White Lake and Grand Blanc, Michigan. Scale Investment Group is a leader in providing low-cost institutional investment services, like 401(k) and 403(b) plans, to small and mid-sized organizations and also manages money for private clients. The firm is a champion for small investors promoting low-costs and transparency of the investment advisory industry. For more information visit scaleinv.com or contact Michael directly at mprus@scaleinv.com.