Good Morning from the Badge and Budget Investor! Today, I am focusing on financial decision-making. Why? When we focus on making decisions, whether good or bad, those decisions lead to actions and actions lead to progress. And progress keeps you moving forward.
“It doesn’t matter which side of the fence you get off on sometimes. What matters most is getting off. You cannot make progress without making decisions.” —Jim Rohn
After waking up one night to go pee and yes, if you know me well, I have a small bladder. I went to the bathroom and returned to bed. I laid my head down on the pillow and tossed and turned for a while. I started to think about and acronym I learned in the police academy, BRAIN.
BRAIN stands for:
Benefits – What are the benefits to moving forward with this decision?
Risks – What risks come with this decision?
Alternatives – What other decisions do I have as options?
Intuition – What’s my gut telling me? What emotion do I feel about this decision?
Nothing – Can I do nothing? Should I pause before deciding?
BRAIN worked for me as a new police officer, but it wasn’t perfect, so I played with it quite a bit, thought about my past experiences and volunteered for additional training.
Eventually, I came up with an expanded BRAIN – a 10-step financial decision-making process that would work for money decisions.
Here is a quick overview of this financial decision-making process:
- Identify (ID) and seek clarity. Ask questions, ask more questions, ask follow-up questions. Don’t stop asking questions until you understand.
- Do I have time to ponder? If so, move on to #3. If not, hopefully you picked this up on your risk assessment and through constant education have learned how to best act in this situation.
- Should I ask the opinion of a spouse, close friend or wise counselor?
- What is my financial plan and does this decision align with that plan? If a plan exists, follow the plan. If there is no plan, refer to the budget.
- What did I do in the past in this type of financial decision? You may not have handled this type of financial decision before, but maybe someone in your inner circle, i.e. spouse, friend, parent, has. Consistent financial decision making is critical.
- What are the ethical issues involved in this financial decision? We must be concerned not just about doing things right, but doing the right thing for the right reasons.
- What are the consequences of this financial decision? Smart people consider consequences before they happen. Smart people pause and try to see the future before it happens.
- Make your decision. Trust you gut. You are an emotional being use and trust your emotions.
- Track why you financially did what you did. It will improve future financial decision making.
- When you learn something new, share it with others. Write a blog, share a story.
IDENTIFY, IDENTIFY, IDENTIFY
Of course, it all starts with number one. The first step in making a good financial decision that will survive the test of time is identifying what needs to be decided! It’s the most important consideration of my 10-step process.
You cannot make the right financial decision if you are addressing the wrong issue. You must first identify and seek clarity by asking clarifying questions as necessary and really listening to what is being communicated to you. Like I said earlier, if you do not understand the financial mumbo jumbo then keep asking questions until you do.
Step 1 is the most important – and simultaneously the most difficult – part of the decision-making process. If you successfully navigate step 1, steps 2 through 10 will fall into place nicely. But step 1 by far is the most important part of the financial decision-making process: ID and clarity.
“Greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice, and discipline.”- Jim Collins