KILDARE FINANCIAL COLUMN: Don’t wait for the perfect time - just do it

LET'S rewind back to September 28, 2023. Because that was the day I was asked by a company to carry out an investment webinar for their staff.

During the hour long presentation, I spoke about how much people should be saving, the factors they need to be cognisant of when selecting a suitable account, how their savings rate can be more important than any interest rate, and I also spoke about two investment accounts that I really liked and was recommending to them.

And I did so for a very good reason because since the presentation one of them has grown in value by 13.09% and the other by 9.86%.

Just to put those returns into perspective, it would take you over five years to get the same growth with the state savings certificates.

After the presentation, there were a lot of people who contacted us looking for help with setting up the accounts for them, and of course we did. There’s no point in telling someone about a particular account if they don’t know what to do next or if they don’t have the time to set it up themselves, so we’re happy to help if people ask us to.

And I’m sure those people who followed through and took action and opened one or both accounts are delighted with themselves and they should be.

There were also a lot of people who, after asking for help, never returned the forms and we haven’t heard from them since.
And now perhaps they might feel some regret for not having followed through.

And that’s something I see happen all the time by the way.

And sadly, not taking action is probably the single biggest thing that is preventing people from moving forward with their finances.

It’s called inertia, and its definition is a tendency to do nothing or remain unchanged.

But people know they should be doing something and most know what that something is, but they keep putting it off and this could be down to a number of reasons.

They either don’t want to make a wrong decision, or they get distracted by work and home life, or they prioritise short term satisfaction over long term goals, which is one of the big reasons we see why many people delay saving. They prefer to enjoy spending their money right now, neglecting saving for retirement, emergencies etc.

The problem with not doing anything and not following through on what we know or have been told to do, is that we may not see or realise the impact until much later on our lives and by then, we may not be able to remedy or improve the situation.
I could give you many examples of this.

Take a gentleman I met last year as a case in point.

He reached out looking for help with some retirement planning. He was 43 years old and explained how he had been working with the same company for the past 13 years. But in that time, he never joined their pension scheme, despite being invited to, shortly after joining.

I asked him why he never did, and he said he remembers being presented with a form and being asked to choose which investment fund he wanted to invest into and it all seemed pretty complicated and confusing, so he put if off at the time.
He promised himself that he absolutely would join the scheme and he was right, he did, but it took him 13 years.

Anyway, long story short, because of his inaction he has missed out on 13 years of free money and effectively said no to receiving €94,640.

And he will never catch up to where he could have been because he can’t afford to make the contributions required, they’ve become too high.

No need to feel sorry for one young gentleman I met last year though.

He was 32 and he thought his 8% contribution was the maximum he could make to his pension fund but he could personally contribute up to 20% right now and that per cent becomes higher as he gets older.

Anyway, he had the ability to save an extra 2% which was going to cost him after tax relief, €55 each month.
That was the price.

The promise was (a) a fund size which was going to be €142,094 higher at retirement which would (b) pay him an extra annual income in retirement of €5,684.

Once I told him that an investment by him of less than €2 a day would deliver those numbers, he took action immediately and notified his employer to increase his contributions and they did. And it took him about one minute to write the email.
He wasn’t going to leave all that tax relief and growth behind him.

Okay, let me go back and give you another example of what doing nothing can have on your finances.

In late 2022, I met a single mother who was under serious financial pressure.

Her son was in college and she was helping him with accommodation, registration fees, food etc. and it was important to her that she do this.

She struggled through the first two years but now the cracks were starting to appear because all her savings were gone, and she was having to fund his costs from her monthly income which was going to be difficult because she still had a mortgage, utility bills, transportation costs and food of her own to pay for.

With probably three more years of college costs ahead, and even with her son working part time to help out, she would have to borrow €25,000, because there was no other choice.

And she admitted a large part of why she was under pressure was of her own making.

She knew she had the opportunity when her son was younger to save his children's allowance. Even without it, she could have easily saved an amount each month that would have covered a significant per cent of his future costs.

And again like others, she always thought she would get around to opening that account, but she never did, and time flew by.
If she only began saving €94 every month when her son was born, she wouldn't have to borrow any money, and she wouldn’t have exhausted her savings either and she wouldn’t have all the sleepless nights she was having.

Let me give you one last example.

I remember a widow telling me in July of last year, about how her husband was always talking about putting a life policy in place just in case he ever passed away. He even had the application form but he never did anything about it.
And very sadly he was involved in a car accident and lost his life.

Their mortgage was paid off, but that was it they had nothing else, and financially she was not in a good place. And if he only followed through and put that policy in place, which was going to cost them €11 every month, she and their three children would be okay from a financial perspective.

I have many more examples I could give you, like the couple I encountered who were paying €107 more each month than they needed to for a life policy, but two years on, they still haven’t gotten around to changing it.

Or people who promise they will begin overpaying on their mortgage but don’t and again discover years later how much interest they would have saved had they. But now that interest is gone, and they will never be able to recover it.

Unfortunately, as time goes by and the longer people delay taking action, they begin to rationalise their inaction by saying things like ‘investing is too complicated’ or ‘I’ll save more when I earn more,’ or ‘insurance policies are a waste of money.’ And if you think these are the type of things of you have been saying to yourself, then I’d say you may need to overcome this way of thinking.

Because you might become your own worst enemy with this type of behaviour and you need to stop if you want to make progress.

And one of the ways you can overcome this is, plain old action.

For sure you need to get the right information from a trusted source and feel comfortable with it and when you do, don’t procrastinate, just go ahead and do it.

And it might be setting up a savings account, making a will, reviewing your mortgage etc. and if you do, it will be a small-time commitment for a long-term reward, trust me.

Resolve to become proactive with your finances rather than being reactive and stop rationalising yourself out of doing something and rationalise yourself into doing something instead - your future self will be very thankful you did.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie