The US Secretary of State, currently John Kerry today (2013-08-30) in a newscast on the possibility of intervening in Syria due to chemical weapons used there, claimed that there is a high and immediate cost of the US doing nothing in response to that use.
Amartya Sen, the Nobel prize-winning Harvard economist who wrote a book called The Cost of Inaction, is quoted in an Economist article A Dollar now or a Hundred Dollars Later as saying:
“There is indeed an “opportunity cost of doing nothing”, that is, the failure to reap the benefits of an effective intervention.”
There is also a cost of doing nothing in our personal financial lives.
What can happen if you don’t take action?
Do nothing to maintain your stuff.
If you neglect routine maintenance on your assets (real estate, belongings, etc) they may end up damaged, worth less or gone. For several years we neglected to hose down the outside unit of our air conditioner. It filled up with debris causing the cooling to become ineffective. We called in the HVAC repair man and spent good money finding out that we really do need to take action on this at least once a year.
If you neglect to winterize your home, your bank account will dwindle due to increased heating costs.
So, seal up those air leaks, make sure your thermostat is set for economy, wrap those pipes to keep them from freezing and make sure your windows and doors are winter proof.
If you forget to disconnect your hose during freezing weather, or wrap pipes that are subject to freezing, your plumbing may freeze and cause damage that requires a professional plumber to fix.
Use heat tape around pipes in areas that freeze, such as attics or crawl spaces that aren’t snug. Make sure outside faucets are securely turned off and all attachments are disconnected, drained and put back safely away from the possibility of freezing.
If you don’t change the oil in your vehicle, the engine might seize up. Do it yourself, or fork out the $15 – $25 it takes every 6 months or so. This is one of the best ways to make your car last longer and perform better.
Do nothing to build $ for the future.
If you neglect to add to your savings on a periodic basis, you will never accumulate enough to invest and consequently never have access to passive income through dividends and interest.
Even if you can only save $10 a week, socking money away with regularity increases the chance that you will accumulate wealth.
If you neglect to track and monitor your investments, your asset allocation can get off balance, potentially causing you to lose more money than you might otherwise have lost – in a market downturn.
Use your own method, whether that be DIY or funds that automatically re-balance or you use a financial assistant that does it for you.
If you are rich and neglect to draw up a pre-nuptial agreement, you may find yourself a pauper if you ever divorce. Yes pre-nups are one of thse things nobody wants to talk about, but sometimes they are necessary.
If you don’t take action to monitor your bank balances you could end up paying fines for bounced checks. I do it the old fashioned way, but there are many newer simpler options for today’s busy people.
Do nothing to provide proof.
If you neglect to take pictures, movies or make an inventory of your insured home, your insurance company may not be able to reimburse you for the entire extent of your loss if you have a fire or other disaster. If nothing else, just walk through your home with your phone or camera and record while you talk. Then put the result in a location other than your home!
If you neglect to keep accurate records on your tax returns and you get audited by a frowning Uncle Sam, you may have to pay huge penalties for back taxes.
Here is what the IRS says about record keeping.
Do nothing to defend.
The cost of doing nothing extends into every aspect of our lives, not just our finances. Are you being bullied at work? Do nothing and it may be seen as acceptance. Is your condo association board continually costing you money? Volunteer to serve and have more of a voice in controlling costs. I had to learn some of these do nothing cost lessons the hard way. Have you?
Describe a time when you did nothing and it cost you please.