I’ve just come back from a lovely seven-day break away with my family over in Rhodes in Greece. One of the things that I was thinking about whilst I was away is how often I have conversations about our inability to make decisions around money and in turn make better financial decisions.
From the people that I’ve been speaking to most recently, what seems to be a really common barrier or a challenge that gets in the way of us making decisions is this idea and concept that we’re going to make a bad decision, or that it’s like one giant decision that we have to make. So for example, where do I invest my money or how do I know that I’m getting the best return or how do I manage my money most effectively? What happens is we put ourselves under quite a lot of pressure about making one mammoth decision which is just too much, so we don’t make it.
I wanted to talk through some of the steps that I would recommend for you to improve how you make better financial decisions.
5 Tips to Make Better Financial Decisions;
Tip one
Take baby steps.
Make it so that any decision that you make around money is not one decision in isolation, so it’s not that one decision that you make is going to have a massive impact on the rest of your life. I mean sure there are going to be some important decisions that you need to make around money, depending on the life stage that you’re in. If you’re just coming up to retirement and your decision is do I retire now or do I retire next year, then sure that’s an important decision to be making. But actually if we break those kind of decisions down, there’s often more than just one decision to be made. So when you’re trying to make any decision about money think about breaking down that to get a series of decisions.
It’s like a muscle that you’re trying to train. You’re trying to build up that muscle so that the more decisions that you make, the more you’re going to strengthen that decision muscle and the easier it will become for you to make any decisions at all.
Break that decision down into smaller easier to answer decisions. Perhaps if that question is do I retire this year, break that down into smaller questions. One of those questions might be what kind of things do I want to be doing when I retire? What does my financial situation look like at the moment? What’s stressing me in my life right now and do I want to get rid of that this year? Or can I survive in it for another few months? Breaking it down into some smaller questions can really help you to make better financial decisions.
The more decisions that you make, the more you’re going to strengthen that decision muscle and the easier it will become.
Catherine Morgan
Tip two.
Get yourself an accountability partner to sense check any decisions.
If you’re the sort of person that procrastinates over making decisions because you find it difficult, often this would be to do with an emotion it’s that sits behind that decision. Often that emotion could be guilt or fear or shame or anxiety, but by giving yourself an accountability partner to sense check that decision can really help you to stop staying stuck in that decision, and help you to weigh out the pros and cons. Perhaps also look at the advantages and disadvantages, or your partner can maybe give you another scenario that you’ve not even thought about.
So get yourself an accountability partner to sense check; this is something that’s worked really well in The Money Circle membership that we launched recently, and this week we’ve actually just opened the doors to the membership again. So if you’re looking for an accountability partner to help you make better financial decisions, have a think about whether you want that to be somebody close to you, or whether you want that to be somebody perhaps in a similar situation or maybe a few steps ahead of you. Getting yourself an accountability partner is really super valuable, just to give you that sense check.
Tip three.
Set a decision date.
This has worked really well for me. I’ve had so many decisions to make this year around my business, and I’m sure if you’re an entrepreneur yourself you will completely understand that we have to make decisions every single day in our businesses, otherwise we just stay stuck. One of the actions that I have implemented that has really helped me is to set a decision date. If I’ve got a particularly important decision to make, or one that’s maybe creating me overwhelm, and I’ve left it on my to-do list and it’s sat there for a week, and I’ve done all the other tasks on my to-do list because they’re easy to do and ignored this one great big decision that I have to make, then set yourself a decision date. Give yourself some time frame around when that decision has to be made.
Tip four
Let go of perfectionism for better financial decisions.
Often we read articles about how perfectionism is our worst enemy; it’s that inner critic coming out and setting really high standards and expectations for ourselves. Actually I think that perfectionism has some really good merits and strengths. I would definitely describe myself as a perfectionist; whilst I know that it holds me back in many ways, it also enables me in many ways. We often talk about the fact that when we have pain in our lives, difficulties, struggles or life challenges, things that have happened in the past that yes, they can have a huge impact on us and our self-worth and our self belief. But we could also turn that fear and that pain into arming us to be better, to do better, to help more people.
That can demonstrate itself in the fact that we can often throw ourselves into these ideal expectations, or we think that we have to make every major decision, and this can put stress on our lives. But I do think that perfectionism in itself isn’t necessarily a negative. So it’s about letting go of perfectionism but looking at how it helps you to move forward. If being a perfectionist drives you then that’s a great strength to have, but how does it also prevent you from taking action? How does it prevent you from making decisions?
Anytime you feel in a position of overwhelm or you feel that element of perfectionism is holding you back, think about the decision you’re trying to make. Does it help you move forward? Will it give you results? Will it bring you return on investment? Will it bring you happiness? Will it do good to help others? Will it serve your ultimate goals and things that you want to achieve?
Tip five
Reduce your choices
Often when we get into decision mode, overwhelm can be huge. If that decision is felt to be too big we just bury our heads in the sand and we don’t make any decisions at all.
Any decision that we have to make has four potential outcomes. Either we say yes to the decision, we say no to it, we say actually we could do either (so come up with an alternative solution) or neither. So tip number six is to reduce your choices.
When I get into any situation where I’m feeling overwhelmed, one of the things that I always try and reflect on and bring my mind back to is that anytime you’re trying to make a decision about anything, whether it’s money related or not, it always has four potential outcomes; either you say yes to that decision, you say no to that decision, but neither yes or no is the right decision. There’s always four potential outcomes, and that makes it much easier to make a decision; yes I’m gonna do it, no I’m not going to do it, I could maybe do one of those options, or neither of those options. Thinking of it from that perspective makes it far easier to make a decision, so think about that for yourself.
Reduce your choices. If you’re trying to make a decision about who to move your mortgage to, then there’s never the perfect answer. Seek help from a mortgage broker for example, ask the question with your accountability partner. If you’re trying to make decisions about where to invest, for example, maybe listen to series 2 of the podcast. Then once you understand how to invest, you’re into the next decision which could be who do I actually invest with. Narrow your choices down, reduce your choices, and it will help you to make better financial decisions quicker.
Any decision that we have to make has only four potential outcomes. Either we say yes to the decision, we say no to it, we say actually we could do either, or neither.
Catherine Morgan
Make Better Financial Decisions
I hope that following these 5 steps will help you to improve how you make decisions and help you to make better financial decisions. Take baby steps; it’s not about one decision in isolation. Get an accountability partner, sense check, set yourself a decision date and stick to it, let go of perfectionism, reduce your choices and think about the emotions. Think about whether you’re stuck in fear of present judgement of your past or anxiety over the future.
Resources:
Join The Money Circle membership
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