Take the Emotion Out of Decisions

Whether it be starting a new business, working on a project at work, writing an exam, or investing, try to keep your emotions under control.

Easier said than done. Especially when failure can mean repeating a course, going bankrupt, or losing your hard-earned savings.

Over time I learned through experience that being rational is almost always a more successful path than being emotional. But it took some time to figure it out.

Now I try to step outside my body and pretend that I am a third party to myself. As if I hired myself for independent financial or business advice.

It is easier to give others advice. That is because I have no direct stake in the situation. I am able to objectively assess the facts of a transaction and give the best possible advice in an unbiased manner. As a professional, I want to arrive at the correct decision. But should I be wrong, it is not me that suffers financially.

In today’s complex world, so much can go wrong that is outside of my control. All I can do is to make the best possible decision at the time and implement it. Success will or will not follow.

But when the decision does involve you, emotions can easily come into play. If you review my earlier post and Mr. Patel’s list, you can see that many of his points directly relate to emotions.

You might be overconfident in your skills. So you become greedy or too aggressive. Perhaps you stop learning or ignore the advice and criticism of others.

You might be too fearful of loss. So you pass up higher risk options, even if the potential rewards are worthwhile. You buy that investment too late and sell too early. You do not start that business because it is safer to stay in your current job.

Do not let emotions get the better of you. Put aside the stress, fear, overconfidence and so on.

Act as if you are not personally (and financially) impacted by the decision. Treat yourself as a third party. Pretend that the transaction involves play money, not your real savings. Or use any other trick that helps you eliminate your emotions from consideration.

Am I always successful in taking emotions out of my decision-making process? No. But I am always aware of their potential impact and that awareness is important.

I try to do my homework on any transaction I undertake. I collect all the available facts and assess them in an objective manner. Then I make a decision and implement it. Knowing that I have done my best usually alleviates my nerves.

I suspect it is the same for those of you still in school. When you have properly studied your course materials and have confidence that you know them well, your level of nerves is less than when you are not prepared. The rest of life is the same. The better your preparedness, the less the negative emotions creep in and cause problems.

Afterwards, I perform a postmortem. It is important to understand why I succeeded or failed in my efforts.

Often people succeed in spite of themselves. Luck typically has a major impact on events and can mask errors on your part. Even when you succeed, look for ways to improve your abilities and areas where you got lucky.

And sometimes when you fail, it is due to circumstances beyond your control. The analysis and actions may have been fine, but uncontrollable factors interceded. Regardless of your investment acumen, had you invested in the stock market on September 10, 2001, you would have lost money over the short to mid term.

Do not beat yourself up over events that are outside of your control. Worry about what you can control and get that right. Do not let the things outside your control distract your decision-making.

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