We Make 35,000 Decisions Per Day, but Seven in 10 Postpone Major Financial Decisions
April 19, 2018 at 08:00 AM EDT
Seven in every 10 Americans postpone making financial decisions, according to findings released today from a research project by Principal Financial Group® and renowned behavioral economist Dan Goldstein. Why? The phenomenon, which can have long-term detrimental effects on financial well-being, is often anecdotally attributed to income. People say they don’t have enough money to save and make financial choices. However, the research finds that what’s largely driving this procrastination isn’t necessarily lack of money; it’s lack of the right, confident mindset.
According to the findings, more than half of Americans (56 percent) have not made any major financial decisions, such as a large purchase, opening or closing an investment account or moving money around in a retirement plan, in the past three years. While 60 percent of people report their income as the top reason for inaction, the research shows that debt and current finances do not play a significant role in people’s likelihood to make financial decisions.
So, what does explain this idle behavior? The research found less than a third (30 percent) of Americans feel comfortable with the amount of knowledge they have about managing finances.
“With access to traditional pensions declining today, the onus of preparing for retirement continues to shift to the individual,” said Jerry Patterson, senior vice president of retirement at Principal. “Features like employer-offered auto-enrollment and matching have aided those efforts, but this doesn’t solve the problem of a lack of financial literacy and its implications on confidence. Fortunately, we now have more ways than ever to educate the world through a smart mix of human interaction and intuitive technology – things like virtual coaches and digital advice for individual investors.”
Goldstein, who is known for his research into financial decision-making, said: “Every day, we make decisions that have good or bad consequences for our future selves. When it comes to money, our present self is more prone to spend, whereas our future self wants us to save. This research highlights that tendency to postpone, but illuminates how the right attitude could help people ‘hack’ their approach to saving for things like retirement.”
Busting financial decision-making myths
Those who do not feel confident about their finances are 64 percent more likely to postpone making major decisions than those who are confident, regardless of their income. But as it turns out, there are plenty of people with similar reported financial barriers who do, in fact, manage to invest and save for retirement successfully. The research reveals that people’s indecision is largely grounded in myths and misconceptions.
Myth #1: “I’ll never know enough to be confident in these types of
Myth #2: “It’s just not the right time”
Myth #3: “I don’t have the money to make these financial decisions”
Patterson added: “As the research suggests, the importance of confidence in people’s financial decision-making can’t be overstated. We at Principal want people to know that no matter where you’re at financially, it only takes a couple small steps to start building confidence in your finances and making the right decisions to live your best life.”
For more information to build confidence in your finances, use Principal’s free planning tools and calculators, explore topics on life and money, or consider registering for an upcoming webinar on a financial topic that matters to you.
The sample consisted of 700 respondents from the general population and 700 respondents ages 25-44 with an annual house hold income of at least $75,000 and investible assets of at least $25,000. All respondents were employed full-time at the time of data collection.
Once data was collected, it was consolidated and weighted to reflect census representation. The margin of error for this sample is +/-3.1% at the 95% confidence level. The survey was fielded between November 6 and November 15, 2017.
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