Financial Decision-Making in 6 Easy Steps

There’s a lot of responsibility which rests on them and, let’s face it, while some mistakes can be undone with relative ease, financial mistakes are a pain to untangle when you’re knee-deep in the fallout.

So it’s easy to get scared beforehand. And we all have our current coping mechanisms for dealing with that fear and avoiding the potential earthquake before it hits.

You might obsess over the options when making the decision. Maybe talk to your more successful, experienced friends and see what they’ve done in the past and how they would advise you. Or maybe you go in to see your financial advisor, only to get that sinking feeling in the pit of your stomach when your advisor spreads out swathes of paper for you to look over, describing IRAs, 401Ks, money markets, and insurance plans that make you think you’re in over your head. Maybe you’d feel the need to read the fine print on every last sheet, and go over it in your mind to know you’re choosing the right products and making a good decision. Scour Google to research the options carefully. Consult even more financial experts. Obsess some more.

Note: these aren’t exactly bad habits. But entrepreneur Kate Northrup, bestselling author of Money: A Love Story, has seen plenty of people burn out on them when making financial decisions, and as she notes, they’re exhausting habits. Just the thought of having to undertake them can leave you feeling sleepy, irritable, and ironically less liable to make a good, clear-headed decision.

More to the point, she says, the problem with obsessing and over-thinking on what decision to make is that life goes on. Opportunities pass, you miss out on them, and you waste time.

“There’s an important part of you that wonders, ‘might there be a better way?’” she says.

There is!

In her new book, Northrup delves into the easy, failsafe way to ensure that you’re making the right financial decisions every time.

The trap that most people seem to fall into is a tendency to silently go over their financial choices in their minds – and only their minds. They preoccupy themselves with the obsessing and the decision-making while letting their bodies run through their daily tasks on autopilot. We’ve all seen that person at the office going through the motions of their day when their mind is clearly elsewhere. Hell, we’ve all been that person at least once. What we don’t realize is that when it comes to financial decisions, this is a matter on which mind and body are better off connected.

“Research has shown us that our physical bodies and our proprioceptors have access to much more information than just our minds,” says Northrup. “When you bring your body into your decision-making and listen to the signals that it’s giving you, you become a lot wiser.”

Here are the six simple steps that will let you tap into this potential and keep you from ever making a wrong financial decision again.

1. Take a deep breath Prior to making a decision, take a very deep breath, all the way into the lower bowels of your lungs. Let it expand your belly – who cares if it suddenly looks rounder? You want to make sure you actually feel the air going all the way in and pushing hard against your diaphragm. And then exhale, and feel it leave your body. Focusing your mind on these feelings will allow you to clear it, even just for a moment. It’s long enough to know you’ll be thinking about something other than your decision in that moment.

2. Close your eyes Even if it doesn’t feel entirely appropriate to do so at the time of your decision-making, close your eyes. Though, if you’re feeling really awkward you could always excuse yourself to the ladies’ room to complete this step. It’s a good idea to give yourself a moment to shut out the world – and any external pressures you might be feeling from anyone around you – so that you can concentrate. It reminds you that this is your decision.

3. Picture one of your choices in your mind’s eye The power of visualization is always a useful tool, but never more than when you’re trying to decide between a number of different options (and outcomes). Whether you’re just picturing the words, like “September IRA”, or picturing something that represents that choice for you, or even visualizing an outcome of deciding on that option. Having a visual image of your choice, even if only in your mind, will make it more real for you.

4. Tune in and listen to how your body feels Now we get to the point where you listen to your body’s input on your decision. Pay attention to how your body is feeling at the moment you’re picturing your choice. Does it feel relaxed and expansive, or tense and contracted? Lighter or heavier? Do you feel energized, or sleepy? You can tell where this is going…does the decision feel right? Or wrong?

For the vast majority of our lives, many of us have been talked out of listening to our bodies, and trained against letting our instincts guide us to decisions. We’ve been told we’re being too sensitive. Even advised to take “chill pills”. But you’re the one who has to live with your decision, and the right financial decision should always leave you feeling good about having made it. Your body can give you the best signal on that.

5. Repeat steps 1-4 for every one of your choices at the time Pay special attention to step 4; be sure to gauge how your body reacts to every single one of your options.

6. Pick the winners Go with the option that makes you feel the most energized, yet relaxed, and that makes you feel the lightest. In other words, go with the right choice.

It may take some practice to wire your mind into following these steps. But with that practice, the time you spend sweating over financial decisions will be cut in half. There’s nothing wrong with doing research and understanding your choices, but at some point you really have to take that plunge – and better sooner than later. Going with your gut is the best way to do it.