The science behind why we delay financial planning and why doing so is a bad idea.

If the mere mention of the words ‘financial’ and ‘planning’ are enough to send you off into comatose state then you may finally have a decent excuse. Doctors and academics are attempting to explore the psychological reasons why we put of making financial plans which in turn can have drastic effects on our financial future.

As part of a quarterly report, insurance group Aviva recently surveyed and tracked the spending habits of 11,600 people in, or near, retirement and their findings gave some startling insights into our financial habits. Although representative of the older generation, over two thirds of those 65-74 year olds surveyed said that failing to prepare financially for retirement was their biggest regret. Asked why, the main reasons cited were financial restrictions (47%), being hampered by family commitments (19%) and simply being too busy to think about it (8%). Shockingly, only 25% of people said they discussed the financial and emotional implications of retirement with their partners and fewer still, just (15%), took advantage of an independent financial advisor to talk about their finances.

Dr. David Lewis, psychologist and author, explains the psychology behind the way people think about retirement by blaming these ‘barriers to effective financial planning’ on the ‘MYGO factor’: ‘My Eyeballs Glaze Over.’ Although a humorous acronym, it relates to our tendency to switch off with anything involving numbers. Unfortunately, although personal finance and financial planning can seem like tiresome number-crunching, the report reveals that ignoring personal pensions plans can have tough consequences later on in life; those who are failing to get-to-grips with their finances are finding themselves with little savings to support the standard of lifestyle they have grown accustomed to.

Lewis also believes that individuals find the thought of looking to the future and closing the doors to a past lifestyle which has interested and rewarded them a ‘highly stressful’ experience. Thus it triggers the two powerful emotions of ‘avoidance’ and ‘denial’ and so adequate financial plans are never put in place. Conversely, the very act of ignoring what our future financial aspects may be means that many will find themselves worrying at a later point in life; a time described as our ‘golden years’.

Carol Yip, an independent financial advisor and author, similarly draws parallels between adequate financial planning and psychological factors such as emotion. As individuals, we all have life roles to play – father, mother, spouse, employer or employee for instance – and each has their own unique financial obligation. Yip says: ‘Each time the [individual] experience changes in his or her life (she cites career transitions, business sentiments, migration, parenthood, divorce and death), there is a financial impact.’ For many, the emotional impact associated with these changes is so great that any existing financial plans are thrown out of the window. If financial planning then is of utmost importance, then regularly reviewing them is even more so.

Whilst psychologists and academics work out the reasons why we fail to set adequate financial plans, both Aviva’s and their results reinforce the benefits of doing so. Talking about financial goals with a partner is one way which can begin to remove the shroud surrounding finances. In addition, some financial concepts are inevitably complex and receiving help in the form of an independent financial advisor can minimise confusion and share the load of ‘tiresome’ figures and number crunching. It’s never too early to consider financial plans such as retirement, and remember the 67% whose biggest regret was not doing so; ignorance is most certainly not bliss.

This post was written by John Hughes who is the resident blogger at , a UK based site that provides access to market leading investment and savings bonds.