Ten reasons why we procrastinate over important financial decisions

Most of us know that putting our finances in order is important. We know we should review pensions, update wills, invest excess cash, consider inheritance tax planning or finally speak to a financial adviser. Yet important financial decisions are remarkably easy to postpone. Sometimes this is simple inertia, but more often there are deeper psychological reasons behind it. Financial decisions can involve uncertainty, complexity and emotion, particularly when they concern retirement, family or mortality.

Here are ten of the most common reasons people put them off.

1. There never seems to be a perfect time

People often tell themselves they will deal with their finances once things settle down. After a busy period at work, after the children finish university, after the election, after markets recover or once interest rates become clearer. Unfortunately, life rarely provides that perfect window. There will almost always be another reason to wait. Good financial planning normally involves making sensible decisions despite uncertainty rather than waiting for uncertainty to disappear.

2. Too much choice can be paralysing

Investors today have an enormous range of pensions, investments, tax wrappers, platforms and advisers available to them. Choice sounds positive, but behavioural research has repeatedly demonstrated that too many options can make decisions harder rather than easier. Someone deciding between two possibilities may act relatively quickly. Someone confronted with 50 different investment funds, pension options and tax strategies can easily decide to do nothing instead.

3. Fear of making the wrong decision

For many people, doing nothing feels safer than making an active decision that could subsequently prove wrong. Investing is a good example. Someone holding a large amount of cash may recognise that inflation is steadily reducing its purchasing power, but investing that money introduces the possibility of seeing its value fall. The potential regret associated with making the “wrong” decision can therefore outweigh the less visible cost of doing nothing.

4. Why money is emotional, not just mathematical

Financial decisions are rarely purely mathematical. Money can represent security, independence, status, responsibility and even family relationships. An inheritance may carry memories of a parent. Selling a business can mean relinquishing something built over decades. Retirement can involve an entirely new sense of identity. These emotions can make apparently straightforward financial decisions surprisingly difficult.

5. The consequences feel too far away

Human beings naturally give greater importance to immediate concerns than distant ones. Putting another £10,000 into a pension may benefit someone enormously in 15 years, but spending the money today provides an immediate benefit. The same applies to estate planning. Someone in their 50s or 60s may understand the importance of inheritance tax planning but feel there is plenty of time to deal with it later. Unfortunately, some of the most effective financial strategies benefit enormously from being started early.

6. Why the cost of financial delay is easy to underestimate

Doing nothing rarely feels like a decision, but financially it often is. Leaving large sums in cash for years can mean losing purchasing power to inflation. Delaying pension contributions can mean missing valuable tax relief and investment growth. Postponing estate planning can reduce the options available later.

The cost of procrastination is often invisible because there is no bill arriving through the letterbox. Nevertheless, over many years it can become substantial.

7. Financial jargon creates barriers

Pensions, investments and tax planning can quickly become complicated. Terms such as crystallisation, drawdown, asset allocation, capital gains, trusts and annual allowances are familiar to financial professionals but not necessarily to investors. After all, it’s not their day job, so when people don’t fully understand something, a perfectly natural response is to postpone the decision. One of the most valuable roles of a good adviser is therefore simply to make complex choices understandable.

8. Why couples don’t always agree about money

Major financial decisions often involve two people with very different attitudes towards money. One partner may be comfortable investing while the other prefers cash. One may want to help children financially today while the other worries about maintaining enough capital for retirement. If those differences aren’t discussed, decisions can remain unresolved for years. Good financial planning should therefore involve both partners wherever possible.

9. Successful people can be particularly reluctant to delegate

People who have built businesses or successful careers are accustomed to making their own decisions. That independence can make it difficult to hand responsibility for investments or financial planning to someone else. Some investors consequently spend years managing increasingly complicated finances themselves, even when they no longer have the time, ability or inclination to do so. Delegating doesn’t mean surrendering control. Done properly, it should give someone better information and more time to concentrate on the decisions that genuinely require their attention.

10. Why financial decisions rarely have a deadline

Many important areas of life have deadlines. Tax returns have filing dates; mortgages have payment dates and companies have reporting deadlines. Personal financial planning often doesn’t. Nobody sends a letter saying your investment portfolio must be reviewed by Friday or your inheritance tax planning completed by the end of the month. Without a deadline, important but non-urgent decisions can remain permanently at the bottom of the to-do list.

The hardest step is often the first one

People sometimes assume they need to have all the answers before speaking to a financial adviser. In reality, the opposite is usually true. The first conversation should help identify the questions that actually need answering. That might involve understanding whether retirement is affordable, whether investments are taking too much risk, whether pensions are structured efficiently or simply whether existing arrangements remain appropriate.

Financial procrastination is extremely common. But the objective does not have to be to make every decision immediately. Often the most important step is simply to begin the process. Once the issues are clearly understood, the decisions themselves usually become considerably easier.