Investing Your Time Productively

“Hello I’m a procrastinator,” I may as well have introduced myself in this manner at the training session on time management.  It turns out, I was in good company.  Though I didn’t realize it at first, the room was filled with others who shared my dirty secret.  The instructor stood at the front of the room holding up the calendar/planner and asked us to start our day – as we should every day – with a to-do list.  When our pens stopped moving, he asked us to prioritize our list with A for urgent, B for important, and C for keep on track.  Next numbers were placed after the letters to further prioritize the list: A1 being the most important, then A2, and so on.  It seemed simple enough, and yet I found myself itching to tackle C3 and B2 first.  These were projects I knew what to do about.  These were things that would produce an immediate reward to my efforts.  A1 —  well, that one I wasn’t sure how to start.  Once I had these goals and priorities written out, it was hard to justify wandering off to handle the less urgent issues.  I felt better, though, when most everyone in the room giggled nervously when the instructor asked how many of us were not even looking at the As, but were thinking about the Bs and Cs.

Financial matters are a lot like those A1s that seem overwhelming or perplexing, so we jump ahead to the more interesting B and C issues – like shopping for a new car, or planning a weekend trip.  Even the “not so interesting” things on our list take a priority because they have a deadline – like paying bills, for instance.  The truth is, while there is no “deadline” imposed by anyone on your financial management, it is up to you to set them.  If you don’t, time has that funny way of passing by very quickly.  Before you realize it, a whole year will pass before you call to get the forms you need to Rollover your 401k from your previous employer, set up a Roth IRA, or the open the kids’ college savings accounts.  There is no bill that is sent showing you what you miss out on, but the reality is that time is the most powerful tool in growing assets.  The table below gives a snapshot of how planning ahead, and making the best use of time can be a powerful wealth builder.

The Planner and the Procrastinator are the same age, but The Planner invests early on, contributing $2,000 every year to an IRA starting at age 22.  Though the Planner only makes these investments for nine years (a total of $18,000) versus the Procrastinator, who invests $70,000 over 35 years, the Planner ends up with $109,222 more at age 65.  How?  The Planner started investing 10 years earlier, and time alone made all the difference.

The Price of Procrastination

Based on an Average Annual Return of 9%

                                    The Planner                           The Procrastinator    __________   

                                    Invests $18,000 in an IRA         Invests $70,000 in an IRA over 

                                   over 9 years (age 22 until 30)      35 years (starts investing at age 31)

Account Value at 65   $579,471                                 $470,249                                            

The Planner Invested $52,000 Less than The Procrastinator,

But Earned $109,222 More.

Source: National Endowment for Financial Education

This example proves that wealth can be built with little investment if you maximize time.  Of course, had the Planner kept contributing for 35 years, the results would have been even more impressive.   So what do you do if you feel time has passed you by?  The point is not to fret over what has already passed – you can never regain it – but to get on track as quickly as you can, so that you make the most of the time you do have.

Like time management, a thorough to-do list will get you focused on what you want to accomplish.  Paying off credit card debt, establishing an emergency fund (3 to 6 months of income), opening a retirement account, and setting up college savings are the basic places to start.  Next, look at what you can realistically contribute every month to work towards these goals.  Finally, treat this commitment as sacred as your rent or mortgage payment.   

While it is easy to get caught up in the day-to-day grind of living and get sidetracked, when you make these goals an A1, you are, in effect making yourself and your family an A1.  That, I believe, is a very productive use of your time.