How to Cure Financial Constipation
April 28, 2010
What was the last big financial decision you had to make? Did you immediately know the answer and take care of it right away or did you file it in the “research and ponder” pile for further deliberation?
If you’re like me, you probably put some thought into it and took your time so you could make the best decision for your situation.
Informed action is smart but do you ever have a case where you experience a little decision making blockage? Making your decision is kind of uncomfortable; you’re worried you might not make the right choice so instead of pushing the decision along you let it sit.
After a while other life events come along that require decisions but they get blocked behind the financial matter you’re still weighing in your mind.
As your financial pipeline gets clogged up the weight and implications of the decisions puts more and more pressure on you, making it even more uncomfortable to get moving.
Have you been there before? Have you been financially constipated? Doesn’t feel very good, does it? Let’s look at a few ways you can cure this condition.
Set Financial Deadlines
Having a do or die date works wonders for getting you in gear. Take filing your income taxes for example, that whole process is one big mess of financial decisions. That’s why the best tax software is worth the money; all the rules and regulations help walk you through all those choices.
Nobody really enjoys doing their taxes; we worry that we’re missing deductions but we also don’t want to drift into any gray areas and end up with penalties and fees if we get audited. If there wasn’t a federally mandated annual deadline some people, probably me, might put off paying taxes for years at a time. Why else do you think that half the people in the country wait until the last few days before the tax deadline to file?
A self-imposed deadline probably doesn’t carry as much weight as the audit division of the Internal Revenue Service but there are ways you can offer some carrot and stick action for your own deadlines.
The obvious carrot approach is to tie incentives to meeting a deadline. Unlike the upcoming home buyer tax credit deadline you can’t knock thousands of dollars off your tax bill for finishing your financial transactions by a certain date but I’m sure you can think of a few things as a reward to help grease the wheels of urgency.
One frequently used technique for shaming yourself into action is to publicly commit to a deadline to several people that can hold you accountable. A method that works really well is setting a deadline with your attorney. Since they bill you for each follow up email, you’ll be sure to get them what they need by the deadline.
Understand Behavioral Economics
One of the biggest financial laxatives around is our emotions. The stock market plunge in 2008 was like a giant decision enema for tens of thousands of people who had been holding stocks for years. As the market sank, people panicked into action and dumped stocks for big losses.
If you want to learn more about how your emotions cause you to do crazy things with your money, read “Why Smart People Make Big Money Mistakes”. It’s one of the best personal finance books I’ve ever read; it’s exploration of behavioral economics will reveal behaviors you probably weren’t aware of.
You’ll learn why it can be so hard for us to make financial decisions and pick up some tips that make it easier to take action.
Just as our bodies can get unstuck through regular exercise and a healthy diet, your financial decisions come easier when you have a standard process for evaluating them. Whether it’s a basic pros and cons list or an in-depth weighted criteria model, using the same approach for making decisions can make you more comfortable with the process.
Familiarity can not only speed up the decision making process, a record of how you justified a decision can make you more comfortable pulling the trigger. It can also help when looking back on old decisions and evaluating whether it’s time for a change.
Visit a Money Doctor
If you don’t feel confident making a decision on your own and it’s holding you back, visit a professional. Experienced certified financial planners, CPA’s, tax attorneys, and estate lawyers have dealt with the money decisions you’re struggling with and can add some useful insight. Getting a qualified objective opinion on money matters can be quite a relief…
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All posts by Ben Edwards