Many of us are afraid to make financial decisions. There is so much we don’t know and so much that (we think) can go wrong. What if we invest in the wrong mutual fund and we lose everything? What if we don’t get the best insurance policy out there? What if we try to start that business and we fail? This fear of messing up often means that we make no decisions and we take no actions. It’s safer to sit on the sidelines and watch, or it’s easier to delude ourselves that our never ending “research” is equivalent to doing something. When you do that, though, you miss out on a lot of great opportunities and neglect necessary tasks. Sure, you might make mistakes. It happens to everyone. But unless you get over your fear of making the wrong decision, you’re never going to get where you need to go financially. Here are some ideas for getting over the fear.
Do something, as long as you know it won’t make things worse: Most times inaction is worse than taking action, even if the action you take later turns out to be a mistake. When you take an action, at least you tried to solve your problem and you likely learned something. Sitting on the sidelines and waiting for the perfect moment to do something rarely works out because there is almost never a “perfect” solution. However, there are cases where taking an action can make things a lot worse. For example, buying a house just to get in on a tax credit can be a big mistake if you don’t run all the numbers and make certain you can afford all the other aspects of owning a home. If you want to buy a house, you need to do your homework first and then buy when you find the home that you can afford. If the tax credit has expired, so be it. Don’t act rashly, but do act.
Research your options and then choose amongst the best: Don’t keep waiting for more information or newer products to appear. Otherwise you’ll wait forever to get something done. Pick the best option with the information you currently have. If better options or information appears later, you can almost always change your mind.
Opt for the choice with the least restrictions: If you’re afraid of doing the wrong thing, look for an option that doesn’t lock you into your decision. Find the option without a contract, for example, or the one that lets you access your money at any time. That way if you change your mind or think you made a mistake, you can get out without penalty. If your decision works for you, you can switch to a contract or restricted plan later to get a better deal because you know it’s a good thing to do.
Ask yourself, “What’s the worst that could happen if this doesn’t
work out?” Look at the worst case scenario and ask yourself if you can stand it. Say you open an IRA and choose some mutual funds. Some of them lose money, even if only temporarily. Is that going to kill your financial dreams, or can you ride it out while you learn the ins and outs of the markets? If it’s going to make you so anxious that you’re going to get sick, then find another solution. But if you’re able to stand the volatility and learn from your foray into the market, it can be a good choice.
Then ask yourself, “What happens if I continue to do nothing?”: Will you lose out on a year’s worth of interest if you don’t open that IRA? Is there a chance you could die before you get the life insurance in place? Will you miss the chance to take advantage of special tax incentives or rebates if you continue to put off buying a new AC unit to replace the unit you know is dying? If doing nothing is going to cost you more than you want or are prepared to lose, then take action quickly.
Set a deadline for completion: Let’s say you want to get your estate plan in order. This may include getting life insurance, making a will/living will, and setting up a trust. Give yourself a firm deadline by which you have all of these matters taken care of. Having a deadline gives you a framework to work within and limits the time you have to stew over your options. Get it done and then if you find you need to change something, you can do that later.
Remember that almost every screw up, even big ones, can be fixed: You didn’t figure out the taxes on your new business correctly and now the IRS wants their money. Guess what? You can work out a payment plan with them and you won’t go to jail. You invested in a bad mutual fund and lost half your money. You can sell the dog fund and buy a better fund and probably earn back your loss and more. You bought a house and now you don’t like it. You can stay in it for a couple of years, build a little equity and then move. Yes, sometimes the solutions are inconvenient and a pain, but there are solutions to almost every problem. Very few decisions are ever permanent.
Remember that screw ups are often learning opportunities: We learn many of our most valuable lessons from our biggest screw ups. You don’t always remember the things that went right, but a magnificent screw up is inscribed on your brain forever. The good news is that you learned something and you’ll likely never repeat that mistake again. If you mess up, figure out why, learn what to do differently next time, and go forward into the future armed to make better decisions.
Someone, I don’t remember who, once said that if you make a decision you have a fifty percent chance of being right, but if you don’t make any decision at all you have a 100% chance of being wrong. So you might as well make a decision and try something. Maybe you won’t get it right the first time but you’ll learn, correct your mistakes, and make a better choice the next time. It beats just sitting around and doing nothing to make your dreams and financial hopes a reality.