Effective Decision Making - the Key to Financial Success
A friend and long-time listener of the show sent this to me and I wanted to share it with you.
"Stumbled across a scripture I didn’t recall ever reading and it was because it was from The Living Bible (TLB) and not the NIV which I usually read. Just thought about your show/job and how it applied to finance and me as well, in that people often don’t try to gather all the facts before they make important decisions."
Proverbs 18:13 Living Bible (TLB)
13 What a shame—yes, how stupid!—to decide before knowing the facts!
A key indicator of success when it comes to money is the ability to make decisions. If you were going to work on and develop a skill set when it comes to money, then set your sites on improving your abilities to make decisions. Each of us falls into 1 of 3 categories when it comes to making decisions.
First, there are the effective decision makers
This is where you want to be. An effective decision maker weighs the pros and the cons of a decision. They follow the advice found in Proverbs 18:13 and gather all of the facts before making a decision. An effective decision maker (and this is key) removes all excess emotion (fear and greed) from the process. Excess emotion is the enemy to effective decision making. I say excess emotion because you can't rid of all emotion and some emotion is good to have in the process. It is when you are processing through fear or greed that creates the problems.
Second, there are the emotional decision makers.
These decision makers process everything through the lens of emotion. When dealing with money those emotions are typically fear and greed. Facts are void when processing decisions through emotion. The main consideration is your interpretations of how bad it will be (fear) or that you are missing out on something (fear) or how great it will be (Greed). Facts on the other hand attempt to shape those emotions and filter them out.
Third, the never make a decision-decision makers
Then there are those who just can't make a decision. They are not necessarily driven by excess emotion. However, one reason for their procrastination is the fear of making a mistake. They are gathering facts. The problem is that they are over analyzing the facts and suffer from analysis paralysis. They assume that by continuing to research information they are reducing the risk of a wrong decision. By the way, by not making a decision you are effectively making a decision.
This is why effective decision making is so important when it comes to money. Money by itself tends to create emotion. Then there is the past emotional baggage that tends to come along with money. Emotion can create anxiety and false interpretations of the future. That complicates things if not held in check.
Like it or not, decision making comes along with financial success. Try these tips for more effective decision making:
(1) Accept that you will not always not make the right decision (and it is all right)
(2) Weigh the facts and the pros and cons then pick the highest probability outcome
(3) Know ahead of time what steps you will take if you are wrong
(4) Most importantly, pray about it the entire time and don't make a move until you feel the Peace of God. Learn to make decisions on God's time table.