Good morning, happy Monday, happy Hanukkah & I hope you had a wonderful Thanksgiving!
“In this life, we have to make many choices. Some are very important choices. Some are not. Many of our choices are between good and evil. The choices we make, however, determine to a large extent our happiness or our unhappiness, because we have to live with the consequences of our choices.”
James E. Faust
With the holidays now in full swing this is a busy time for decision making. Do I get that 3rd serving of Thanksgiving dinner? (you can guess where I landed on that 😉) Do I make this splurge purchase for myself while shopping for Christmas gifts? Do I change my investments because of a market hiccup?
Let start this morning’s thoughts with a couple of questions:
- What was the best financial decision you ever made?
- What was the worst financial decision you ever made?
Going a little deeper on those questions, can you think about the condition you were in when making those decisions? Were you stressed? Overwhelmed? Fearful? Relaxed? Confident?
I am now in my 24th year in this industry (holy cow, at what point do I start to sound old 😲) and what I’ve observed is that big financial mistakes are often made under two conditions. #1 when people are in emotional charged seasons of life (examples: a family member passes away, a divorce is occurring) #2 when being pressured to make a decision in a short period of time (examples: time share sales presentation, car purchase).
As my older children (now 22 & 20 years old) were growing up and having to make some important life decisions we would often talk about “adulting.” Well, as we are all fully aware … adulting is not all it’s cracked up to be 😉
Financial management is not for the weak of heart. So …
What drives our financial decisions? It is a philosophy? Emotions? What feels right at the time?
In doing research for this message I came across a number of studies done on this topic. There are several factors that influence decision making, including past experience (Juliusson, Karlsson, & Gӓrling, 2005), cognitive biases (Stanovich & West, 2008), age and individual differences (Bruin, Parker, & Fischoff, 2007), and belief in personal relevance (Acevedo, & Krueger, 2004). If this is a topic of interest to you feel free to check out the full article: Decision Making: Factors that Influence Decision Making, Heuristics Used, and Decision Outcomes – Inquiries Journal
Obviously, this is a complicated topic, one far beyond the scope of this email, but I would like to leave you with a couple of thoughts I have found helpful.
When my brother and I were teenagers and both had jobs at Dairy Queen and would be able to go shopping with our own money (oh, to be 17 again). If we saw an item we were interested in buying we would ask ourselves a “what am I willing to pay for this item?” BEFORE looking at the price. Then we would look at the price tag and if the item was at or below the price we had predetermined then we would make the purchase, if it was priced higher than we established we were willing to pay we would put the item back. This can be a helpful strategy for those more prone to splurge spending.
Another question to would ask myself, especially when facing an important decision: “Would a future version of Jonathan be glad the present Jonathan made this decision?” Asking this question can oftentimes make the decision at hand much clearer.
A good friend of mine told me recently “thoughts disentangle themselves as they pass through the lips & the pen” … if there are important decisions on your plate and my team and I can be of assistance, please do not hesitate to reach out … we are honored to help anyway we can.
Make it a blessed week ahead!