Procrastination: The Key to Financial Freedom

I was reading a blog the other day when I stumbled across an interesting comment. The article was actually one of JL Collins popular articles discussing his annual Chautauqua. If, like I did, you have no idea what the hell this weird word is, you can read more about it over at his blog here: http://jlcollinsnh.com/category/chautauqua/ (awesome blog & book by the way).

Chautauqua is an old Native American word used to describe a gathering to share stories, ideas and wisdom. Jim likes to gather a group of like minded people in some far flung place like Ecuador once per year for a week of presentations, conversation, excursions and just hanging out around the fire or hot tub. It’s a popular gig, the feedback is very positive and there is a pretty long waiting list to attend from what I hear.

Anyway, I digress a little. The comment in the blog was basically damning Jim for tempting him into these far flung excursions when he is trying to save for financial freedom. As you can imagine, this is not a cheap trip so it’s not very conducive to the average Joe who is trying to save every cent they have.

But it got me thinking about how these people who all preach financial independence can afford to go on such luxurious trips. Then I realized it. It’s all about timing.

Procrastination!

At 28, I’m likely considered among some of the younger pursuers of financial freedom (there’s plenty younger but I’m certainly in the lower bracket). As such, I have the benefit of time and compound interest on my hands. Every dollar I can save today is worth approximately $12.22 by the time of traditional retirement (65), or 1,222% more than it is worth to me right now.

Logic tells you then, that the more I can save today, the more it will be worth in the future and the sooner I can retire. Compare me to somebody who is 10 years older at 38 and their $1 saved today would be worth only $6.21 come 65. That’s almost HALF what it is worth to me. Add another 10 years and assume the person is 48 and that same $1 is now only worth $3.16! Almost half of the 38-year-olds and a mere quarter of mine. At 58 your dollar is basically worth, well, slightly more than a dollar.

So let’s assume this Chautauqua costs $5,000 per person (total guess). To me then, taking that trip would be reducing my future bank balance by about $61,000. Holy shit that’s an expensive trip! Maybe it’s not quite worth it for me just yet, no matter how much I’d like to meet Jim and the rest of the crew. To someone 10 years my senior it’s costing around $31,000, 10 years more and it’s more like $16,000. All pretty sizeable amounts, but as you can see, the older you get, the less it is costing.

So that got me thinking more about financial freedom and how people can use this knowledge. I think that most people understand that the sooner you start saving, the better. Procrastination is really only an example of the power of compound interest, but it really puts a spotlight on your expenses when you are younger versus older. Knowing this, would you have behaved differently in your youth? I can think of expenses that I’ve incurred in my younger years that I probably would have thought twice about had I been shown how much it is actually costing me. That $1,500 lads booze vacation of 2007 springs to mind, or maybe the 2001 Ford Fiesta I bought and drove about 6 times before selling at a loss & moving to Canada could have gone amiss.

Anyway, there’s no point living in regret from the past, but it can certainly open your eyes to the future.

The More You Procrastinate The More You Will End Up With

I’ve now taken this knowledge one step further and began thinking about all the expenses in my life that I can procrastinate as much as possible in order to maximize future gains. Here is a table of how much you stand to gain by procrastinating an expense:

Number of Years Delayed% Increase in Ending Balance
17%
214%
323%
431%
540%
1097%
15146%
20287%
25443%
30661%
Note: This table has assumed a 7% return on investment. This table also does not take into account inflation.

So what are typical expenses you can probably procrastinate quite easily? They tend to be your typical large consumer expenses like vacations, cars, furniture, electronics etc. Unless you plan on delaying eating and drinking I wouldn’t go to the lengths of procrastinating buying groceries for example.

The Kicker

What’s the obvious problem here? Well, it’s our own desire for immediate gratification of course. This is actually compounded by the fact that when we are young, we want to experience the world, procrastination gets in the way of that. We want to go on trips, buy the latest gadgets, eat at the best restaurants, go to the best concerts and generally do everything we possibly can, right here, right now. We don’t want to wait until we’re 50 to go hiking in New Zealand, we don’t want to wait 25 years to watch Taylor Swift’s “This Is It” tour. We want it all, and we want it now. We’re worried that what is cool and interesting now won’t be around when we’re old. We’re worried we might not even be alive when we’re knocking on 50. That’s actually a valid concern, until you reach 50 and live another 30+ years in regret.

No, sadly for most people it’s only when we get older and wiser that we realize all of this stuff will be waiting for us to appreciate at a time when we can actually afford it. By then though, it’s already too late.

Now, I’m not saying you should go through life living in a bunker socking all your bloody money away and experiencing nothing because you’ll end up with a huge nest egg if you do that. Heck, I’ve spent plenty of money doing loads of things in my time that I wouldn’t give up even now. But if there is something you can delay, even for just a few years, you will definitely end up better off for it.

I think cars are probably one of the best examples of something you don’t necessarily need to upgrade frequently, but plenty of people still do. How many people replace their car only when it’s unfit to be driven on the road, or when it’s more expensive to repair than replace? It’s probably a very low %. People upgrade their cars just to have the latest tech like reversing cameras, heated seats, built in GPS, self-opening doors, automated parallel parking etc. None of it is really necessary, you can still drive your 1995 Chrysler Cirrus LXi just fine. The longer you can delay upgrading your car, the better. If you can survive another 5 years using your car, you’ll be 40% better off in the future.

Thanks, but no thanks Jim!

So even though I know Jim would be beating down my door if I even showed a glimpse of interest in his Chautauqua, I’ll have to delay it for another year because I simply can’t afford $61,000 of my future to hang out with a bunch of evil Baby Boomers who I blame for being unable to afford a house in this ridiculous city!

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