I’m the last person to cast aspersions on anyone who procrastinates, given my own occasional lapses in that area. I’ll leave it to the self-help gurus to supply behavior-modification techniques.
What I will say, however, is that procrastination can be a very costly habit.
Here’s how putting off the inevitable can reap unpleasant financial consequences:
Nuisance fees. Simply failing to pay fines for overdue library books or parking violations can escalate far beyond the original penalties and interest they accrue. Many local governments trying to balance their budgets are increasingly aggressive at collecting such fees – sometimes even turning them over to collection agencies.
Tax penalties. Everybody knows income taxes are due on April 15 (or in this year’s case, April 18). If your tax return or request for an extension isn’t filed by then, the penalty on any taxes you owe increases dramatically. You’ll pay an additional 5 percent of taxes owed for each full or partial month you’re late, plus interest, up to a maximum penalty of 25 percent.
However, if you file your return or at least ask for an extension request on time, the penalty drops to 0.5 percent per month, plus interest. So, even if you can’t calculate your taxes by the deadline, at the very least, file for an extension.
Student loan deadlines. Anyone wanting to apply for federal student loans must first complete a Free Application for Federal Student Aid (FAFSA), available at www.fafsa.ed.gov. This time-consuming process involves gathering lots of financial data, so it’s understandable that many people put it off. But, by missing the filing deadline, you could forfeit thousands of dollars in assistance.
And, what many people realize too late is that although the federal application deadline is June 30, deadlines for aid from many states and individual colleges are often much earlier. It really pays to start your research in the fall for the following year.
401(k) participation. Even though they know their retirement savings are inadequate, many people still postpone contributing to their employer’s 401(k) plan or IRA. I can’t afford it, the investment options are too complicated – the list of excuses goes on. But the simple fact is: The sooner you start saving, the faster – and larger – your account can grow.
If your employer offers matching contributions (often 50 percent or more of the first 3 percent of pay you save) you should at least contribute enough to reach that match. Where else will you get a 50 percent return on your investment?
Here are a few other ways procrastination can nip your wallet:
• Miss the vehicle registration or emissions check deadlines and you could get a ticket.
• Not keeping up with preventive car maintenance could result in costly repairs later on.
• The same goes for your body: Get regular dental exams and physicals to prevent serious medical conditions or catch them early.
• Always notify billers of your new address right away. Missing payments can lead to late fees and even increased interest rates.
If any of these scenarios ring a bell, see if you can’t knock off at least one of them. Who knows, you may get on a roll.
Jason Alderman directs Visa’s financial education programs. To participate in a free, online Financial Literacy and Education Summit on April 4, 2011, go to www.practicalmoneyskills.com/summit2011.