Our own Brian Littlejohn recently answered a couple of questions on financial paralysis posed by a reporter at The Wall Street Journal. A transcript of the questions and Brian’s answers are below:
REPORTER: What advice would you give to someone who feels financially paralyzed?
BRIAN: See if getting more information helps. Oftentimes, financial paralysis stems from a lack of information. Do some research online. Speak with a financial advisor. Speak with family and friends. Attend a class at a local community college or library. Once you’re feeling more knowledgeable about the choices that are available to you, make a list of the pros and cons that are associated with each one. Doing nothing should also be considered as a choice. Sometimes, that can actually the best course of action for a given period of time.
REPORTER: What decisions typically cause people to freeze up and be afraid to take action?
BRIAN: In general, having too many choices when making a decision can cause people to freeze up. They feel overwhelmed by the possibilities and end up doing nothing as a result.
REPORTER: What advice would you give to someone who needs to take financial action (whether it’s getting back into the stock market, selling their home or changing careers) but are afraid?
BRIAN: I would point out to them that the cost of inaction can be high. By waiting, a person may decrease their exposure to positive financial effects like compound interest and increase their exposure to negative financial effects like inflation. Additionally, the longer one waits, the harder it may become to recover from the inaction. A person who waits until 50 y/o to start saving is likely to have a very difficult time accumulating enough money to fund a comfortable retirement.