What is personal finance paralysis?Personal finance paralysis is pretty much self-explanatory, but to be clear, it explicitly refers to a fear of making a wrong personal finance decision. Being scared of making a bad choice financially leads people to put off making the decision until the very last minute, or in some cases, not making a choice at all, according to recent research by the online broker Freedom Finance. According to their study, the average person decides to give up on opting for a decision on their personal finances after 21 minutes. The consequences of such personal finance paralysis can be costly.
What are the costs of personal finance paralysis?The same research, conducted in partnership with Professor David Hillier, an economist at Strathclyde Business School, shows that such indecision can have huge costs for our personal finances. Delaying choices when it comes to personal loans, payday loans, mortgages or credit cards costs the average person a staggering £1,598 each year. This equates to an alarming £18.7 billion in total every year. This calculation is based on national figures obtained of households and individuals who had a credit card, personal loan and/or mortgage too. The average amount that hesitation over personal finances was estimated on the percentage of consumers in the past twelve months who had not switched on their mortgage or other kinds of personal finances. This information was then compared against statistics based on average market borrowing rates. The study carried out by Freedom Finance also revealed that:
- A failure to consolidate existing credit cards (or switching them) costs consumers in the UK an astonishing £10.5 billion in additional interest per year
- When it comes to not making the decision to consolidate a personal loan, this costs each year around £5.7 billion
- Meanwhile, when it comes to those who have an outstanding mortgage, this equates to an additional £2.5 billion yearly