This guest post is from Jaimie, who writes about personal finance at paidtwice.com.
Do you look before you leap? Or do you jump right in with no reservations?
Recently I've been watching my daughter navigate learning to walk. It is quite an experience, especially since I never really got to see this process in action with my son. As soon as my son could pull himself up to standing, he was letting go and stepping and falling face first, getting back up, and doing it again. He went from standing to walking in only a matter of days.
My daughter is much more cautious. She works her way along the edge of something and then very carefully reaches out to the next thing, and if she can't quite reach, she'll readjust her feet to get a little closer and try again until she finds a way to reach or can reach something else. I know eventually she'll feel confident enough to let go, but it won't be until she is completely sure of herself and what she's getting into.
My children demonstrate two completely different approaches to the same problem, rooted in two different thought processes about how to get things accomplished.
Do you tend to make decisions quickly, with little time for reflection? Or do you plan each option before deciding on a course of action? How we make decisions is tied to our own innate temperament, and after watching my two kids, I'm convinced it may in fact be hard-wired from birth.
Your temperament can have a large effect on your financial decisions, both day-to-day and in the long term. If you tend to act now, think later, you might be tempted to sign up on the spot for something that looks attractive without knowing the full ramifications of that decision. But if you're a “look before you leap” type, you may miss out on something that's only available for a limited time because by the time you've sorted through all the long term implications the opportunity has passed.
I tend to act now, think later. This can be dangerous, especially combined with a credit card and a “there's always tomorrow” outlook. I've made financial mistakes that I am still paying off years later. On the other hand, I've rarely been known to suffer from “analysis paralysis”, where I get so caught up in the details and nuances I can't make a decision between different options. I do like to analyze, but I tend to do so in reflection versus as part of the initial decision-making process.
Being aware of your own temperament can be useful. We are all some combination of the impulsive and reflective, but generally lean toward one or other. Using both to our advantage is ideal. When buying a home earlier this year, I fought my impulse to make an offer on the very first nice house we saw. Instead, I did research and made a carefully considered decision weighing all the options. (This approach may not work for you in a very hot housing market — ours was not.) But my impulsive nature had its place, too, when we did find the right house and knew it was priced well. We didn't agonize over whether it was the perfect house, but moved forward knowing that it was a great choice at the right time.
If it sounds like I am slightly envious of people who are innately more “look before you leap”, I very well might be. I've often wished that it was my nature to carefully consider and evaluate before moving forward. I can make myself do so, and have when faced with large decisions such as buying our house, but I generally would rather act now and think later.
I'd like to say that as I've grown older, I've grown wiser, and learned to control the impulsive part of my nature, but it isn't really the case. I can stop and consider before taking the plunge, but often I still leap first ask later. At least now, I'm aware of my impulsive tendencies. Even if I don't always fight them.