Could You Be a Victim of the Ostrich Effect?

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2. Tax Preparation Time

It’s never too early to get started on your taxes, even if you missed our end-of-year tax gifts to give yourself. But the Ostrich Effect can tempt us to tackle those piles of receipts and forms at the last minute, leaving us scrambling to get it together at the beginning of April.

When you push off tax preparation, you run the risk of not having enough money to cover the bill, as well as missing opportunities to contribute to your retirement accounts. You’re also more prone to make careless mistakes on your return–ones that could result in costly penalties.

How to Face It: Sophia Bera, Certified Financial Planner (CFP®) with LearnVest Planning, advises clients to buy an accordion binder for tax-related items. If you use an accountant, see if he can suggest any other tools to help you organize your forms throughout the year. “Then,” she says, “gather all of those documents into one spot, so that you’re really prepared when you sit down to do your taxes.”

3. Overdue Bill Notices

Let’s say that you accidentally missed a utility bill payment or you couldn’t make your last car payment. It can be tempting to “not get” notices by mail or “not be at home” when creditors call looking for that money, but hiding your head in the metaphorical sand can do real harm to your finances (and your psyche).

How to Face It: Accidents happen. In this situation, you can use one of two solutions: If you have the money, pay the bill immediately. If you don’t have the money, call the creditor. It sounds intimidating, but people are much more inclined to be generous when they know you’re trying to make a situation right, rather than ducking their calls and pretending that you’ve moved to Azerbaijan. “If this is the first time that this has happened,” says our trusty financial planner Sophia, “you may be able to call the creditor and get the late fee waived.”

Ask if you can set up a payment plan to settle the balance over the next few weeks or months (and then make sure to set aside that money in your budget) or set up automatic bill payments for standard charges, such as rent.

It doesn’t really matter which strategies you use to face your financial problems–as long as you get your head out of the sand.

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  • Shelley

    It also translates to stock market investing.  When people don’t have their exit strategy set from the start or are remaining unaware of risk change states to their stock or etf holdings, they are sticking their head in the sand.  Indeed, people stop opening their brokerage or 401k statements as was displayed in periods like 2008.    We need to re-educate the public as to the importance of risk management in their investments.  Studies has proven that just missing the worst days of the markets can increase one’s returns tremendously.  Read more at:  http://smartstops.wordpress.com/

  • Deneen

    Only bad thing about this article is that it is a myth that ostriches bury their heads in the sand….check it out on National Geographic.