Navigating Decision-Making: A Guide to Managing Choice

You will have heard our weekly email or listened to the podcasts that we produce. Our core theme is to help you make choices in your life. After working as a Financial Planner for many years, this focus was born. In my early career, I spent most of my time helping people transition from their working years to retirement. It was important to convert superannuation funds into income streams. To be able to offer useful solutions to these clients, I needed them to be clear about when they planned to retire and what income they required. Some people were retiring within six months or less. This was a very clear and straightforward situation. For people who had a longer timeframe before retirement, I found that the level of uncertainty was higher. People who told me confidently that they were retiring at a certain point in the near future, for example, at age 60, often changed their minds when we reached that point and decided to stay another year or two.

It took me some time to realize that asking for a retirement date was not the best way to go. Instead, I asked people, “when would you prefer to be able to choose to retire?” Everyone could answer that question, and it gave us a good reference point from which to plan.

Over time, I realized that framing the majority of objectives as options or choices worked better with people’s real lives. You may have set goals, such as a trip to Europe or renovating your house. But you have a specific time in mind when you would like to achieve them. Things change, and external factors also come into play. You may have planned to extend your house this year, but for various reasons (higher interest rates, job security concerns, etc.), you decide to put it back by 18 months. It is much more humane to plan around the possibility of doing the renovations in the current year.

In my professional field, I focus on financial choices, but having more choices in general is seen as an important ingredient for happiness and satisfaction. Recently, I read about the downsides to choice. When you have too many options, you can be overwhelmed and procrastinate. This can lead to you doing nothing. This paralysis can lead to feelings of frustration or failure.

In a best-selling book, Why More is Less, the author observes that success or failure at achieving goals affects our happiness. Too many choices make it less likely to achieve goals.

We are faced with a dilemma. We are happy when we have choices, but too many options can lead to frustration. What is the solution?

Filters.

It does all it can to eliminate spam. It may also divide your emails into different folders. Why is it useful? This will help you reduce overwhelm and focus on what really matters.

The same approach must be taken when it comes to making choices. How can you narrow down the vast array of options so you can quickly make good decisions and move on?

The filter method is applicable to many areas of life, such as fast food and healthy food. However, my expertise lies in financial planning. I will, therefore, stick to this area.

In the financial world, your goals should be used as filters. On the podcast, we often discuss goals, and if I’ve ever read my Financial Autonomy Book, then you will know that an entire chapter is devoted to setting goals and prioritizing. Clarity in your goals is essential to a successful strategy for financial planning.

Consider an example of a fictional customer using goals that I share with my clients.

Jane has set herself three goals. Jane has three goals.

1. This year, renovate your home. The budget is set at $10,000.
2. Spend $15,000. Have a trip next year to Italy.
3. You can retire at 60 years old on an income of $85,000 in current dollars.

Jane has achieved success in her career and earns a six-figure income. She also has an impressive savings capacity. It gives her a lot of options. Jane goes out on the weekend with a friend, who offers to take her for a drive in his new Mercedes convertible. He says it costs him only $2000 per month to lease. Jane can easily fit this amount into her budget.

The experience and wonders enamored Jane about whether she should purchase a Mercedes convertible of her own. She asks me for my opinion as her financial advisor.

We start by applying the filter of her goal. Does this car fit in with our goals? This is the case.

Next, you should consider whether purchasing this car is a worthwhile goal. Goals are constantly changing, and they’re not always set in stone. So, adding new goals to the list is something that occurs quite often. Jane tentatively agrees to the new goal, but only after the three existing goals are achieved.

From here, we can start modeling. We have already modeled the situation and created a plan to help her achieve all three of her goals: the renovation, the Italy trip, and the retirement option at 60. How does this change if you spend $2,000 per month on a car lease?

We calculated the cost of leasing and found that it would compromise her retirement goals. Jane has the choice of retiring at 60 without buying the vehicle or purchasing the car to change her retirement goal from 61 to 60.

Jane can make an informed and rational decision by filtering Jane’s choices through her goals.

We all face choices every day. Were we to eat at home or in a restaurant? Were we to book a local vacation or fly to Europe?

There are so many choices. Clarity about your goals can help you to quickly eliminate the rest so that you can focus on what matters most.

You’ve likely seen the idea that an opportunity can be classified as hell, yes or no. You either accept the opportunity if it makes you excited and fired up, or you decline it. Saying yes to something means you have to say no to another. You can’t afford to go on holiday because you bought that new lounge suite. These two approaches complement each other and help you narrow down your options. They are also great additions to the core approach I suggest, which is to start with clear goals.

We all love having choices, but we must also acknowledge that there are downsides to too many options. We must be able to filter out most of the options so we can focus on those that bring us the happiness and satisfaction we deserve.