Throughout the life on any living person, financial decisions must be made. These decisions can be basic, such as choosing what credit card to use for an appliance purchase to be financed over time. Some other decisions that require more planning could be the purchase of an automobile or the purchase of a new home. The stress of making these decisions can be overwhelming to many people.
What can be done to relieve the stress of decision making? Stress is usually created by an atmosphere of uncertainty. As an example, most people that are buying a new home are either assuming a current mortgage or creating a new mortgage. This usually means a higher monthly payment than is currently being paid. This creates more stress.
Over the years, I have found ways to relieve the stress of a major financial decision. I would take a legal pad and draw a line down the middle of the page. On the left side of the page I would write the word PRO at the top. On the right side of the page I would write the word CON at the top. I would leave the legal pad on the dining room table. Anytime, over the next week or two, I would write down any thoughts that came to my mind about the investment. If it was a positive thought, I would enter it under the PRO column. If it was a negative thought, I would enter it under the CON column. Sometimes I would get up in the middle of the night to write down my thoughts. At the end of a week or two, there would often be several pages of PROs and CONs. I would then sit down and read my thoughts and determine if the PROs outweighed the CONs. Oftentimes I would invite trusted friends or associates to read my thoughts and offer me their opinions. I would then enter their opinions to the PRO or CON columns.
There is an important item that should be entered under the CON column for any investment. That item is “what if everything goes wrong”? Can I still afford the investment? For instance, you decide to buy another house. What if this is the top of the market and you are paying more than you could conceivably sell the house for in the future? Or what if you lose your job just as you are assuming a higher mortgage liability? Do you have liquid assets available to meet your needs? Over the years, I have advised individuals to have 6 months of living expenses set aside for use in the event of an emergency. I now recommend that individuals raise that to one year of living expenses set aside for use in the event of an emergency.
The more thought that is put into the investment decision process usually has an offset of less stress. It makes common sense. By the time the investment is made or the investment is declined, there is a thoroughly researched process for the decision. You will never have to second guess yourself. And you will know that you have eliminated the biggest mistake that investors make. That mistake is impulse buying or selling. You will never be guilty of that mistake.