Asleep at the Wheel?
Thoughts on Awareness and Decision Making
Anytime you have to shell out serious money for something, you want to make sure you are making the best decision possible. For some of us, it comes naturally and easily. For others, it can become a long drawn out process that leaves you exhausted, frustrated and ultimately not happy with any outcome. There are some major points that I use to help me stay focused and hopefully make the right decision.
Want Versus Need- Lets say you are getting ready to purchase a new car. You probably need something that starts reliably and gets you back and forth to work safely. Pretty simple right? There are thousands of cars out there that fit that description. Maybe you want something with all wheel drive or a navigation system. Definitely not needs but they will certainly make you safer and more comfortable. Having a complete list of wants and needs is a critical fist step in your process
Timing- How much time is there between today and the day you need to make a final decision? I find that I, like most people, will wait till the very last minute to make a decision. When confronted with tight deadlines, most will not spend nearly the amount of time researching and analyzing as they would if there was no deadline at all. Timing also effects how much risk you are willing to enter into.
Risk versus Reward- Certainly reward plays a big part in decision making. Not only is there the reward of finally acquiring an object of affection but also there is reward in the finality of the process and reward in the experience of consuming or the ongoing use of said object. The risk (at least in this scenario) is that the object doesn’t deliver on its promise to perform as expected, retain its resale value or deliver an expected result.
If you believe that splurging on a $4 Latte will taste delicious and make you feel emotionally better by drinking it, and this has worked in the past, the risk level is relatively low. If you are stretching your budget to buy that $100,000 Mercedes because you believe it will help you excel professionally or attract the opposite sex, thats probably a risky purchase. I try to be very clear on what my expected return is. It helps clarify many of the other factors.
Budget vs Actual budget- Any number of factors can help define your budget: Cash on hand, amount you can save within a given time period, available credit, etc. For the most part I try to stay under or at my budget, but through my research and analysis I may find something a little better than what I originally set out to buy. Instead of buying a fully loaded Chevy, I realize for a few thousand more (over my budget) I can get an entry-level Mercedes. I try to figure out what the value of the higher-priced item is and if it is worth the stretch. If you are not careful, this is when the impulse purchase come into play and burn you, bringing on buyers remorse. Your actual budget is the amount you are willing to go over your original budget, without putting yourself in the poorhouse.
Value- What “serious money” means is different for all of us and could depend greatly in how much we value the object. You may refuse to splurge for a $4 Latte but not hesitate to buy a new $100,000 Mercedes. Having a good understanding and comfort level with these values is critical in your decision making process.
Research and Analysis Paralysis- The 5 points above will give you plenty to think about. Layer in your research on the object, including review of spec sheets, online reviews, going into the store and talking to a specialist, and word of mouth, you could potentially cripple your decision-making abilities. Don’t let it. Use the info to your advantage, but know when to stop. Pick a few trusted sources and lean on them the most. Have someone play devil’s advocate for you.
Stress- Not to get too technical or in the weeds on this, I’ll save that for the scholars. Stress plays a major part in your decision making and varies greatly in individuals. Some excel in decision making under stress and others not so much. Are you more inclined to make a risky purchase while under extreme stress? Best to know your tendencies and if possible setup the parameters in your favor.
What if I do nothing?-A byproduct of all the above is the amount of forward momentum built up and the amount of pressure you put on yourself to not only make a final decision, but make the right decision. Should I stay within budget and buy that Chevy and just be happy, or should I spend more for the Mercedes and be in love with it. We tend to over look a third option, that is to do nothing at all.
Very few decisions are life and death, very few are unrecoverable, and if they are, then this isn’t the right article to be reading. Taking some time away from the research and the decision can, in some cases, give you some room to breath. Step back. Look at the alternatives. Let’s say your car broke down and the garage wants $2,000 to fix it. You feel like it isn’t worth it and want to buy a new one. You are stuck between the Chevy and the Mercedes. You need a car now because yours is currently not functioning. Alternatives may be to rent for a few weeks, borrow a car from a friend or family, take public transportation, ride a bike, etc. All can give you the space you need.
Gut-In the end, for me personally, my gut plays a huge part in my decision. This isn’t the case for all. Some people will go strictly with data, dollars and cents, and past measurements. Others will use perceived return or word of mouth to weight their decision. Others use it all. Most of the time my gut is the thing I trust the most. If I had to weight it, probably up to 25% of my decision is gut. Ultimately, after the purchase, the only thing I evaluate is if I am happy. That is not something that can be accurately captured in a spreadsheet.
What’s the point?
Generically speaking some decisions need to made in under 5 seconds, some in 5 days, 5 weeks or months. We make hundreds of decisions a day. It doesn’t matter if it is a major purchase, a career change, whether to go or stay, or what to eat for lunch. We all have a decision-making process. Having a good understanding and being aware of what your process is can have a tremendous effect on the desired outcomes. You are less likely to skip or dismiss steps. You can be confident that you did your due diligence and know you made your decision with the best information available to you at the time. If need be, get it out of your head. Put it on paper, have conversation with someone or multiple people. Most importantly, make a decision.