Every decision is a financial decision

Well, ok, maybe not every decision. But thousands of minor choices, including opening a window or flipping a light switch, are personal finance decisions.

A few days ago, I came across this interesting post by Kelly McGonigal in which she describes the vital role of mindfulness in losing weight, citing scientific studies. This paragraph stood out to me:

"Why are we so easily influenced by external factors? According to Wansink, most of our eating decisions are automatic. To demonstrate this, Wansink asked people to guess how many food-related decisions they make each day (Wansink & Sobal 2007). Consider the question yourself. Do you have any idea? If you’re like most people, you don’t: participants guessed an average of 14.4 choices. In reality, when the participants carefully tracked their decisions, the average was 226.7. That’s more than 200 choices that participants were unaware of initially. And without awareness, it is hard to listen to the body’s wisdom or make conscious choices."

Participants guessed an average of 14.4 choices. In reality, they averaged 226.7 choices.

That’s a startling fact, and it’s one that doesn’t just center around weight loss. It’s highly relevant to every single positive change we make in our lives, whether it’s weight loss, kicking a bad habit, or controlling our spending.

We make far more decisions every single day than we ever realize when we reflect on it.

How many times a day do you think you make a decision that affects your personal finance? I’m guessing that a lot of readers of The Simple Dollar who have been around for a while will probably have a higher number than newer readers, but I’m going to guess it’s still low.

When you choose a beverage to drink, you’re making a personal finance decision.

When you choose to open up a window, you’re making a personal finance decision.

When you choose to flip a light switch, you’re making a personal finance decision.

Even decisions that seem like single choices are often a combination of a bunch of decisions. When you pump gas, you’re not just choosing the kind of gas to put in your tank. You choose how low you let your tank get before stopping for gas (below half a tank means quite a bit of gas lost to vapor). You choose which station to go to. You choose what payment method to use. You choose how fast to pump the gas (slower is actually better). You choose whether to go inside for additional purchases.

A trip to the grocery store has an astounding number of decisions. You are constantly choosing between products, what aisle to go down, whether or not to put that impulse buy into your cart, and so on.

All of these decisions are small. Most of them have only a penny or two of impact. The catch is that there are hundreds or thousands of these a day. If you just completely disregard them, the money is going to seriously add up over time.

I’ve found several tactics really help in terms of being mindful of what I’m doing with my money.

First, I don’t do decision-rich tasks unless I’m in a mindful and focused state. In other words, if I’m not rested or focused, I try very hard to avoid tasks that involve making a lot of spending decisions. I don’t shop unless I’ve slept well, for example, and I try to avoid shopping alone with all three children. If I’ve had a poor night of sleep or if I have my children with me, I can’t be mindful and focused and it’s easy to overlook lots of little decisions.

Second, I try to find relaxation and recreation in decision-sparse situations. I’ll go to the park and play disc golf – there’s virtually no way to spend money there. I’ll get in a comfortable chair and read a book. I’ll go on a long walk around the neighborhood.

I don’t relax while shopping. I don’t relax while browsing e-commerce sites on the internet.

Third, I try to reflect on my decisions after the fact. I’ll examine my grocery receipt and ask myself if all of these purchases were good decisions. At the end of the day, I’ll reflect on how the day went. I try to reflect on the little decisions I’ve made along the way and decide for myself outside of the moment whether I made a good choice.

Finally, when I know I’m going to be in a challenging decision environment, I put constraints on that temptation. If I’m going to a bookstore, for example, I’ll take only a $20 bill with me into the store. I’ve given myself permission to spend that $20, but I’m not spending anything else. I can’t spend anything else (at least, not easily).

These tactics work well (in some form) with almost every personal challenge we face.