In a world where what we say can “live forever” on the Internet, we all need to be careful when posting to Facebook, Instagram, Snapchat or any other social media platform. A prime example is what occurred to the rapper 50 Cent before he appeared in bankruptcy court recently. He posted a photo of himself sitting on the floor with stacks of money spelling out “B-R-O-K-E.” His creditors were NOT amused.
This week, I spent the majority of my time talking with people in financial coaching sessions and I heard a lot of people acknowledge that they made very dumb (their word, not mine) financial decisions when they KNEW it was a mistake before doing it. It made me wonder how often that happens and why we do it. Why do we make bad decisions? We willingly disregard our instincts and move forward to make regrettable choices. My challenge to you: STOP IT!!!
When you're about to spend way too much money buying something that you don’t really need – don’t do it! When you are thinking about reducing your 401(k) contributions for a short term reason – walk away from your computer and don’t allow yourself to do it! When you are about to buy a car and the payment is almost as much as a mortgage on a small house – be like Nancy Reagan and “Just Say NO.”
Prolific business authors Chip and Dan Heath have a book about decision making, Decisive: How to Make Better Decisions in Life and Work. It goes into the “4 villains” of bad decision making: 1 – Our focus it too narrow 2 – We have confirmation bias 3 – Short term emotions get in the way 4 – Overconfidence hurts us. If you can understand why you are about to make a bad decision, you’ll be less likely to follow through with it. The book gets better when it moves from diagnosing why we make bad choices to building a good decision making process. There are a few simple steps there that we can all use to help us make better choices in life. They call it the WRAP method:
- W – Widen your options. Move from “this or that” to “this AND that.” Don’t limit your view.
- R – Reality test your assumptions. Try to see the decision from your point of view, the points of view of your friends and family, and people who would disagree with the decision. The more angles you see, the better your decision becomes.
- A – Attain distance before deciding. I love the 10/10/10 rule. How will you feel in 10 minutes, 10 months, 10 years about this decision?
- P – Prepare to be wrong. Build in time for the unexpected. Anticipate problems and don’t let a bad decision linger.
There is a lot of info packed into each part of the WRAP process. If you are looking for a way to improve your decision making process, head to your local library or hit your local bookseller to look for this book. Maybe it can awaken your inner “financial conscience” voice. When managing your financial life, slow down, take a deep breath and try to listen to that voice.
This post was derived from the Financial Finesse Blog. Click here to read the original, full, post.