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Why Some People Can’t Save: A Matter of Urgency

This article was written by in Money Management. 3 comments.


When I worked for a large corporation, I was around people who liked to operate their business responsibilities with a sense of urgency. Every little task was important, and they ran around the office like the company’s stock price depended on the speed at which they completed their tasks.

It’s not a terrible way to operate, but in reality, in the particular area of the company in which I worked, I felt it resulted in a lot of wasted energy. The company’s performance was completely unrelated to how quickly one would fast-walk from office to office. The tasks we performed, all internal to the company with no connection to the money-making business areas, were not critical. Much of the urgency was for show, and I wasn’t interested in playing that kind of game.

That’s probably why I never really fit in with the corporate world.

Real urgency, however, it was often prevents the important things from getting done. In business, constant interruptions, bad management, or disorganization all can create urgent matters, and when you address those urgent matters, you have to take time and effort away from important matters. For example, you may be working on next month’s financial report, a report that will be released to the public and has an impact to investors. You’re maintaining your concentration as much as possible on the numbers you need to analyze, when you receive a call from your boss who wants to analyze the company’s use of airline travel and needs information from one year’s worth of expense report, and he wants the details by the end of the day.

You break your concentration to focus on this urgent request although it is relatively unimportant compared to the financial report. And imagine you are often interrupted to deal with urgent requests like these, continually affecting your ability to work on the projects that are important in the long-term.

I’m not sure where I first saw this matrix, but it has come up in different areas of my working life. Projects, tasks, and goals can be plotted on a two dimensional plane where the two dimensions are urgency and importance. The same grid, and the need to take some time and think about your activities in relation to these two dimensions, comes in handy when dealing with life outside of work, including in personal finance.

Plotting your financial activities

Every household is faced with expenses that need to be paid on a monthly basis. You can even tie Maslow’s Hierarchy of Needs into this concept. You need shelter, food, and water. These are urgent needs, and they are important as well. The need to pay these bills falls in the “critical activities” quadrant.

If you can’t pay your rent, you could be evicted. If you can’t pay your mortgage, you bank could foreclose on your house. If you can’t buy food and water, you will die. These are critical. Look at the importance dimension as how something relates to your long-term goals. Obviously, you can’t reach your long term goals if you don’t have sustenance.

What happens when you find yourself dealing with a surprise hospital bill? This is an urgent matter, but when you aren’t covered by insurance, it creates an interruption in your life.

If your goal is to be a professional freelance photographer, you will have to deal with expenses pertaining to your business. Because photography expenses, which could involve the basic equipment you need, are tied directly to your goal, they rank high in importance, but lower in urgency than your basic survival needs. If you want to settle down with your partner and buy a house in a nice location, this would also rank relatively high in importance, and for the most part, low on urgency.

One thing people often forget is that an emergency fund needs to be ranked towards the top of both the importance and urgency scale.

Dealing with interruptions

On each dimension, there is more than just “high” and “low.” Every activity can be plotted anywhere on the spectrum. Here is a sample map based on on a quick evaluation on typical expenses a family might see. Your plot may be slightly different depending on your household’s expenses and how they may relate to your life goals and your needs, but as you can see, there is room for interpretation.

Expenses in the top right corner are your basic human needs, necessary to live and to be physically and mentally able to tackle your goals. The top left corner quadrant contains those expenses necessary to achieve your goals but that represent less immediate needs.

Those interruptions that affect your finances, often on a temporary basis and that have little to do with your personal and professional goals, are placed in the bottom right quadrant. These expenses are the reason development of an emergency fund is considered a critical activity; that will help you deal with urgent interruptions. The bottom left quadrant is reserved for anything remaining — expenses that are relatively meaningless towards your goals and have no critical need.

These are distractions — and there’s nothing wrong with having distractions. When you are in solid financial condition and have taken care of your critical activities, important goals, and interruptions, you can allow yourself to work with distractions.

Urgency trumps importance.

When a household has limited funds, as they might if the sole income-earner is working a minimum wage job, the importance dimension often becomes irrelevant. Living paycheck-to-paycheck or worse, a family may never see the left three-quarters of the map. There may be no money left of a weekly basis to tackle anything to the left transportation.

If you don’t have hospital bills or home repairs to contend with, that might be enough to survive, but if you do find yourself with unexpected expenses, you have to make choices between these bills and keeping the power on in your house and taking the chance of being evicted for not paying rent or losing your house for neglecting your mortgage.

Financial planners and others giving away free advice often suggest shaving some percentage of income off each paycheck to begin the establishment of an emergency fund, which can help deal with urgent expenses that have little bearing on long-term goals, but they often don’t realize that this can be nearly impossible — if not completely impossible — when dealing with threats to shelter, health, and safety, brought on by being unable to deal with the expenses in the upper right quadrant.

As an article on CNN Money recently pointed out, many people assume that families don’t save — that includes saving for an emergency fund, for retirement, and for education — because they lack self-control. The assumption is that they are more likely to pay for distractions than fund their important goals. While there are certainly some cases where distractions are valued above goals that manifest in the future, but that’s often because they have to remain focused on urgent expenses, and when they aren’t, immediate satisfaction relieves some of the stress of urgency.

For the most part, the article argues, scarcity of attention in the culprit. Planning for the future — dealing with the important but less urgent expenses — takes away your attention. Activities that are more important require more attention. If a household gets to the point where it is thinking beyond the most urgent expenses, the attention that remains may only be enough for less important activities.

What keeps you from focusing on the areas of life that are important but not urgent? Would you draw your urgency/importance map differently?

Published or updated December 20, 2013. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 3 comments… read them below or add one }

avatar Brad Clegg

Really liked this post. Thanks so much for sharing.

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avatar Matt

I think the lack of savings is multifaceted including what you mentioned; lack of education and societal pressures keeps attention on the distractions and not on the truly important items. If people were given a basic education in financial fundamentals they’d see the importance of things like emergency funds and saving for retirement and not just on the quick fix of the video game.

But we’re focused on instant gratification.

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avatar Ivan Widjaya

People love to create their own problems. I see that some people allocate money purely to travel and entertainment. These are distractions and they should not be the main focus. With these, you will never be able to save some money.

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