The older I get, the more complicated my life gets — and the harder it is for me to make decisions. Do we have anything in common there?
By far, the most complicating factor has been having children. Not that that's a bad thing. It's not bad, just … complicated. And since we just added another child about two weeks ago, we're adjusting to less sleep and more laundry. So kids = sometimes hard decisions. For example, here are a few of the decisions that we've considered since having children:
- Should we save for our children's college educations?
- Do we buy a car for them?
- Should one parent stay at home?
- How do we manage our budget on a shrinking income?
- With our increased expenses and lower income, how do we handle our own retirement savings?
But the decisions extend beyond money, too. How do we manage our time? In the middle of adjusting to a newborn, we are still in the middle of a huge remodeling project on our fixer-upper. What sane person decides to replace the siding, windows, wiring, and insulation in the middle of major life changes? We are doing it, but our sanity should be questioned.
Anyway, so I find myself a little overwhelmed with making the best possible decision for my (and my family's situation).
Enter Decisive by Chip and Dan Heath. The subtitle of the book is How to Make Better Decisions in Life and Work. If that doesn't sound like what I need (and maybe you, too?), I don't know what does.
I loved the book and wanted to share a few things I learned from it.
Agonizing over decisions?
The authors describe four “villains” to decision-making.
- First, we define our decisions too narrowly. For example, as we were preparing to have children, I first asked myself: Should I quit my full-time job or keep it? Two options. The authors say that often, we should be asking ourselves broader questions and broadening our options. Should I stay full-time? Quit completely? See if working part-time is a possibility? Maybe my husband should cut his hours or work from home two days a week.
- Second, we — all of us — suffer from “confirmation bias.” As they discuss in the book, “Our normal habit in life is to develop a quick belief about a situation and then seek out information that bolsters our belief.” Uh oh. So we deliberately seek information that supports what we think already, huh? We think we're making good decisions, but we probably aren't making the best decisions if we unconsciously sought what we wanted anyway.
- Third, short-term emotion affects our decision-making abilities. Sometimes we need to detach ourselves from the situation to gain some perspective.
- The last villain is overconfidence or assuming that we know more than we really do about what the future holds. This is one that some readers took issue with when I wrote about our smaller retirement savings. Just because we think we're doing okay doesn't mean our retirement savings won't be obliterated by an accident or disability.
So how do we make smart decisions anyway?
- To counteract the narrow framing, widen your options. Are there more than two choices? Is there a better way? And another way, take away all current options and force yourself to think of new options. But don't have too many options. Studies have shown that having too many options doesn't improve the decision-making process. You can also look for others who have already solved your problem. One of my favorite things they recommended was looking at yourself when you did do things well. For instance, if you had several days in a month when you didn't spend money impulsively, analyze what was different about those days compared to the days you did spend impulsively.
- For confirmation-bias, you need to test your assumptions against reality. Instead of looking at the option you want, you may want to consider the opposite — or find someone who disagrees with you. They also discuss zooming in and zooming out on certain situations. By zooming in, we're looking at a close-up, and by zooming out, we're taking more of an outsider's perspective. And I learned a new word by reading this book: “ooching.” “Ooching” means to test your hypothesis by creating a mini-experiment. A swimming example is to dip one toe into the water to test it before diving in.
- Find a way to become detached from your short-term emotions. Another excellent strategy they offer is the 10/10/10 strategy. When faced with a decision, ask yourself how you will feel about your decision 10 minutes from now, 10 months from now, and 10 years from now. We like what's familiar to us, so even though not all personal finance advice is applicable to us, we are more comfortable with what we've heard most often. To combat this, try looking at the situation from the perspective of an uninvolved observer (or, think about what you would tell your best friend to do if she were facing a similar situation, and why). Think about your priorities and honor them.
- Since no one can know the future, prepare to be wrong about the future. The authors talk about a tripwire, something you put in place that causes you to evaluate past decisions. I think this one may be particularly valuable in past financial decisions, because it prevents status quo. To prevent overconfidence, they mention considering a range of possible outcomes, both good and bad: What's the worst thing that can happen? What's the best? A premortem is to consider that your decision has totally tanked. By asking yourself why your decision was theoretically a bad one, it forces you to face your overconfidence.
This book was full of interesting stories and case studies. I found its premise to be very helpful as I personally navigate a lot of important decisions.
Do you have any tricks to avoid decision paralysis? Do you think you make good decisions generally and, if so, how do you think you accomplish this?
Lisa Aberle is a college professor by day and a freelance writer by night. Always an aspiring writer with an interest in money, she once ironically misspelled “mortgage” during a spelling bee. Most of her current adventures take place on the four-acre mini-farm she shares with her husband in the rural Midwest (where she writes with gel pens whenever possible).