13 Nov 2015 The Cost of Delay

I took a good look at my to do list yesterday. You know the list we add things to and instantly feel we’ve accomplished a big part of the task merely by writing it down? My list contains things like cleaning the gutters, fixing a crack in the shower tiles, a thank-you note to so-an-so for dinner last week (or was it two weeks ago already?), a wedding gift for John and Mary (we have a year), changing my oil, scheduling a physical, reviewing my life insurance and meeting regularly with Geoff and Jared to review Sharon’s and my Wealthcare plan.

You probably noticed how varied the list is and much how much the items vary in importance. You might also suspect there are some things missing from the list, things that are tough to write down like having that difficult conversation with a friend to transition a professional relationship. Along similar lines, did you also notice that the most important things on the list appear at the bottom, almost as if gravity naturally pulled them there, well covered by important, but less critical aspects of our busy lives? The weight, by the way, is fear.

We like to do the things that give us more immediate reward because accomplishment makes us feel better. Alternatively we tend to put off things like doctor visits, difficult conversations, and sharing our financial life plans out of fears that we often fail to address. But here’s the thing: When we take the time to weigh our fears in terms of the cost of inaction, we invariably find our fears puny in comparison to the benefits gained through acting.

Let’s look at some real world cost/benefit analysis. We’ll start with a simple one first. How many of us put off calling the cable company to drop those 2,000 channels we never watch because we fear the time it will take or we doubt we can maintain our resolve against the kind, yet highly trained, specialist bent on preserving her/his company’s revenues? But if we prevail we will free up another dinner out with our spouse each month, or perhaps pay off the mortgage a year or two sooner.

Many list items, like the one above, fall into the category of JUST DO IT – like physicals, gutters, cracks, etc. Just as Geico says, “15 minutes could save you 15% or more on car insurance.” Did you know that all those device charges you have plugged in all over the house drain power even when your devices are not connected? Did you also know that you should not change your oil every 3,000 miles as the sticker on your windshield suggests? There are likely hundreds of dollars wasted in our monthly budgets that could be better purposed with a just few minutes on the phone and some web research.

Now let’s crank it up a bit. I am a planner, a pretty good one, yet my own wife Sharon’s and my financial plan is not as comprehensive and as fully integrated into the complexities of my life (ie. my business, my wife’s business, family business, and other interests) as it should be. In the last few months I have taken steps to change that and have asked Geoff and Jared to meet regularly with Sharon and me to review and refine our plan. One result of this comprehensive planning has been adding a Cash Balance Saving Plan (a simple form of pension plan) to our company’s retirement benefits.

After careful study to ensure that the company and Sharon and I could accommodate the reduction in immediate cash flows required of a pension, we moved forward with the plan. The result will be tens of thousands of dollars saved from taxes (as an S Corp. we pay business taxes on our personal 1040). Adding the plan required increasing 401K and profit sharing benefits to Beacon employees as well. Given that these dollars were headed to the US Treasury without action, it proved to be a win-win benefit once we confidently put fear to rest regarding the multi-year commitment required of pension plans. The benefits to Beacon employees immensely outweighed the cost of time, effort and fear arguing for inaction.

With surprising consistency, financial matters tend to paralyze us more than any other. There are the obvious ones like life insurance and estate planning, but addressing them brings results. We’ve got something to show for our efforts and we feel better once we have done it.

But there’s a crucial aspect of our financial lives we all face when we are forced to chose between a financially better relationship over one where friendship and trust are strong. The differences may focus on costs, expertise, comprehensiveness, or some combination, but even seeing all the benefits clearly laid out, even if they include hypothetical differences of hundreds of thousands of dollars, even if there are things we clearly dislike about our current relationship, the resistance to change or disruption can be awesomely powerful for many.

When paralyzed by relational ties, we do well to re-visit our cost benefit analysis to include ALL the costs and benefits. Human costs are not so easily measured as leaks, oil changes, and pension funds. Our reference should include all the relationships involved in the decision, not just the one in jeopardy. If it were purely a professional relationship we were dealing with, the decision would be easier. But we must still ask a tough question: Are we willing to sacrifice our family’s optimal lifelong interests to remain in relationship that should exist, at a minimum, to champion what is best for us anyway? There is no better example of where our emotions can lead us to accept the good at the expense of the best.

Opportunity costs compound negatively over time. Issues not addressed will impact our wallets more significantly than the fix would have cost in the early stages. Opportunities acted on can begin immediately compounding well into the future to change lives. Maybe its time we turn our to-do lists upside down to capture the hundreds of thousands of dollars in opportunities now and worry about the hundreds a little later. Neither takes a lot of time, just some courage, persistence, and action.