June 19th, 2019
Millions delay financial planning due to stress and lack of time
New research from Scottish Widows shows that over 4 million people in the UK claim they do not have enough mental space and find it too difficult to make a decision when it comes to their finances, and a further 6.4 million people state they don’t have enough time to deal with important life admin.
According to Scottish Widows, it isn’t just about having sufficient time to dedicate to making decisions, Brits also need to consider how much effort they are willing to give them. For instance, the study found that 52 per cent of Brits make sure they have researched and are making the best decision regarding a holiday destination yet, when it comes to their pension arrangements, only 29 per cent claimed to be making an informed decision.
The research also found that 51 per cent haven’t made a decision about whether to purchase critical illness cover and 38 per cent haven’t come to a decision about whether to buy life insurance. Furthermore, 47 per cent have never even thought about making changes to their pension
When asked why, 19 per cent said that they are put off because it is too time-consuming, while 17 per cent claim it’s too stressful.
Alarmingly, this indicates that a large number of us aren’t making essential financial decisions, which may leave us out of pocket.
Robert Cochran, retirement expert at Scottish Widows, stated: “It’s easy to get caught up when dealing with day-to-day decisions in our hectic lives, but this is stopping many of us from spending the right amount of time making important decisions, which can impact our financial wellness.
Getting to grips with your financial situation, like figuring out if you’re putting away enough for retirement, is a big decision to make about your future, but technology is making it much easier for people to picture their retirement – seeing your future self makes it much easier to make choices now than a bunch of complicated numbers.”Additionally, the research also found that people don’t always give important life decisions, such as their finances, their full attention with 11 per cent admitting to managing their money at work and 44 per cent sorting theirs while sitting on the sofa with 52 per cent admitting to dual screening, with the TV or a movie on in the background.
Professor of Organisational Behaviour, Professor Mark Fenton-O’Creevy, at The Open University Business School and expert on financial decision making, said: “People will procrastinate when a decision makes them feel anxious. They will also procrastinate making a decision if they feel they are incapable of making it.
Those who fail to actively plan their finances will make less effective choices. Pensions are a classic example – the government have moved to auto-enrolment as so many people didn’t take action.
Research has found that smaller decisions can crowd out the big ones and important, urgent choices get left behind. All unimportant, less urgent stuff becomes a useful distraction from the more important things.”
Unsurprisingly, delaying making financial decisions may have a damaging effect on our finances e.g. delaying dealing with your tax returns can lead to fines, and generally the longer it takes you to make decisions, the less time your finances have to grow in value as is the case with pensions, investments and savings.
Professor Fenton-O’Creevy added: “Important decisions about our lives can be easier to tackle if we create the mental space to deal with them.
Putting lots of time and effort into everyday choices not only reduces our time and mental resources for more important decisions, it can be a way of avoiding difficult choices we should be making.”
Therefore it would be prudent to speak with professionals such as accountants, solicitors or financial advisers in order to assist, where necessary, in helping you make informed decisions. They should have the necessary qualifications and experience, with access to various research facilities, to help make the decision making process far easier and simpler for you.
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Written by Kay Crooke – Associate Practice Director at Prosser Knowles Associates Limited.