Photo: iStock
Photo: iStock

When decisions go from ‘How to’ to ‘When to’

The 'when to' is a crucial decision in financial life, probably as important as the 'how to' and 'how much to' decisions

I am reading a really cool book. When: The Scientific Secrets of Perfect Timing by Daniel H. Pink is a book about timing. Pink wants to turn timing from art to science and introduce a new genre in book titles, from ‘how to’ to ‘when to’. Pink says it matters when in the day we do things because his research shows that the human race has energy rhythms that are consistent across the world. Most people work better in the morning, hit an energy trough by about 2 pm and then recover by about 3 or 3:30 and then hit much higher levels by evening and 9 pm. What’s so great about that you may be asking? Well, for one, his work finds that scheduling a doctor’s appointment in the morning than in the afternoon may give you better care. Having your parole hearing in the morning carries a higher chance of being set free than in the afternoon. His advice: figure out your energy rhythms and then focus on your most productive and meaningful work in the time you know you are most effective. Leave routine tasks like admin work for the office day energy slump time.

If beginnings are important, so is half time. Reaching the mid-point of a goal or deadline seems to energize people and groups into a burst of energy. Pink’s work finds that nothing much happens in the first half of the deadline, but just as the mid-point is reached, teams come together, stop squabbling and begin to get the work done.

But there is another human rhythm that Pink documents and which has relevance to the timing of this piece—the end of March 2018, the end of the financial year 2017-18. Endings, writes Pink, are hugely significant because people kick harder near the finishing line. Nine-enders or people who are aged 29, 39, 49 and so on are more likely to sign up for a marathon than other age groups. Nine-enders are over-represented in first-time marathoners by 48%. Not only do people sign up first time at a decadal end, but those who are regular runners improve their timing when they turn 9-enders. Reaching the end line also makes us push harder. Of the total points scored in National Football League, a significant number came in the final minute of the first half of the game.

A hard deadline seems to have an energizing effect on people rather than an open-ended choice. People with a hard deadline are more likely to sign up as organ donors than others who don’t have this deadline.

As we stare at the end of yet another financial year, it’s a good time to look back at our own behaviour over the year. The year begins with good intentions of getting a financial plan and having more control over our money. But then life events take over and before you know it, the year is over. Now faced with a hard deadline of completing tax-saving investments by end of February, you get into products that are not fully researched or are better sold than others. It is time we rethink our hard deadlines for our money. The deadline is not about how to, or even how much to invest, but on setting goals. It is much easier to find a product to hit the annual Rs1.5 lakh with than wade through all the issues that go into a goal setting exercise. Goal setting itself is a goal and you need to set yourself a hard deadline for the goal-setting process.

When is a good time for this deadline? Pick a birthday or a festival to provide the emotional marker for this goal setting day. By this Diwali I should have my goals in place. Or by the time the baby turns two, we should have our goal set in place. Pick an event or a date that you remember often and mentally tie the goal setting deadline to that date. This date can be up to six months into the future for your first goal setting exercise because serious goal setting is a time consuming process—it cannot be done over an afternoon. You need to know what you own, what you forecast you will earn, spend and save, what and when you need the money, how much return you think you will earn on your investments and what your goal will cost in the future. This is hard work.

Most plans get derailed halfway and you need to nudge yourself to keep going. Make the family participate in this goal. Make an event out of it. Use all kinds of tricks to remind yourself of your goal setting deadline—calendar alerts, reminders, white board warnings. Involve kids if they are the right age to keep you on track by asking them to pick a penalty for you if you miss this hard goal setting deadline. Put periodic markers and deadlines in place. If the final goal setting deadline is in three months, have a list of what you should have achieved by the end of the first month, then every fortnight for the second month and then every week till you hit deadline.

Once the goals are in place, begin the next deadline setting. You need to choose the products to invest in. Again, set a deadline that is no more than 1-2 months away. This is a difficult part because of the choice overload and the sharp sale pitches for various products. Use the time to carefully choose products that work for your plan.

Once you have the full plan in place, a third set of deadlines come in. This is revisiting the plan. Pick two dates in a year—Holi and Diwali, or birthday and anniversary (if these are six months apart) and mentally put a hard deadline of revisiting your plan and products.

The ‘when to’ is a crucial decision in financial life, probably as important as the ‘how to’ and ‘how much to’ decisions.

Monika Halan writes on household finance, policy and regulation. She is consulting editor Mint. She can be reached at monika.h@livemint.com.

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