How to make better decisions

30 April 2021

reading time:  minutes

Earlier this year, my wife and I had to make the difficult decision to put down one of our cats.

His name was Ta’ke (Tucky). We loved him. He came into our life at a special time of our life. Ta’ke and his sister, Puku, were our “practice babies” before we actually had children. He lived with us in Melbourne for seven years, and he and Puku came to Christchurch with us when we moved back to New Zealand.

We had to make the decision fairly quickly.

Ideally, I’d s-l-o-w a big decision like this so I could give it more consideration. In this case, it wasn’t an option.

However, I was able to go through a robust decision-making process and come to peace with the fact that it was a thought-out decision, and was in the best interests of everyone – especially Ta’ke.

As well as celebrating Ta’ke’s life (which has been easier, knowing that we made the best decision we could), I’ve been reflecting on my decision-making process for this particular decision, and important decisions in general.

In the past few years, I feel like I’ve gained a lot of clarity in terms of my personal process for making significant decisions.

I’ve applied variations of this process in lots of contexts:

  1. Whether to have more children (two is enough).
  2. Introducing new services with Fairhaven Wealth (the INSIGHT service and Stealth Wealth), and increasing fees.
  3. What maintenance/improvements to do on our home.
  4. Whether to buy an interest in a holiday home.
  5. Whether to upgrade my car.

In retrospect, I’ve already laid out some aspects of this process in a previous article: “What I think about when I think about buying something expensive”. What I’ve come to realise, however, is that this was a narrow description of a much broader process.

Below are some aspects of my own decision-making process.

Please note: I'm not being prescriptive. I'm sharing parts of my own process. Take or leave whatever works for you – and add what works for you. What's important is that you build a decision-making process that works for you.

Note also that I don't systematically go through each of these things. I don't personally run through a checklist. This is just a description of some of the philosophies and approaches I've internalised.

Make the right decision, not the fastest decision

Where possible, s-l-o-w the process down. It’s not always possible, but in most cases, beware of false urgency.

"Act in haste, repent at leisure."

Put it in writing

For me, there's a world of difference between thinking about something in my head, and putting it in writing. Putting something in writing adds discipline, allows for nuance, and allows me to think of many more moving parts than I can keep in my mind at one time. It stops me from going around in circles on the same narrow range of concerns, and allows me to make progress from one sitting to another.

It can also be useful to look back at past decisions, and see your thinking process with fresh eyes. This will often reveal your gaps in thinking, which can inform your future decision-making.

If I have time, I’ll put it into writing in the form of an essay. Sometimes it’ll end up in the form of an email to someone (sometimes close friends; usually my wife. You don’t want to see my long-winded emails about whether or not we should more children…).

Ask yourself: is this one decision, or a set of decisions?

Often, what presents as a single decision is actually a set of decisions.

Sometimes, you can simplify your decision-making process significantly by narrowing the bigger decision down into a series of smaller decisions.

Consider the pros and cons

Put this in writing. Try to play around with this. Order the the pros against each other, to work out which ones you weigh most heavily. See if you can weigh them. Do some of the pros clearly offset the cons or vice versa? Are some of pros actually cons in disguise, and vice versa?

Sometimes, I'll doodle and draw little images of the pros and cons (or other aspects of the decision), and use this as a way of changing the way the less conscious parts of my mind think about (and incubate on) the decision.

Consider the options

“YAHOO!” – You Always Have Other Options!

Do you think you’ve considered all of the options listed? Great! Now, use your imagination and creativity and try to think of a couple more.

If I don’t make the decision, will alternative options come up again?

This was the hardest part of our decision with Ta’ke. It was a terminal decision.

Fortunately, most decisions aren’t like that. If I raise fees for my business and demand dries up, I can change it. If I don’t buy this car, another car will come up. Same with a holiday home.

As someone recently said to me: "I've been around this rodeo long enough to know that something else will come up".

Think of the trade-offs 

In terms of financial trade-offs, this is more important with some decisions than others.

Ta’ke was a member of our family, and money was less of a factor compared to other decisions.

With a car, for example, it’s more of a financial decision. I’m very conscious that driving a more expensive car involves lots of trade-offs compared to driving a less expensive car.

Think of the ongoing costs

We usually wear the consequences (and costs) of a decision for a long time after the decision is made.

It's important to think in terms of lifetime cost of ownership rather than just the upfront cost.

In terms of ongoing cost, make sure you don’t just think in terms of money. A lot of things you buy, for instance, come with a cost of time, in terms of maintenance and learning to make the most of them. Worst case, they come with a storage cost: where are you going to store that tool or gadget?

What will I regret, and how?

Sometimes, there are two dimensions of regret:

  • will you regret saying "yes"?
  • will you regret saying "no"?

In the case of a car, would I regret not buying a car like this sooner than later?

Think of how to frame the decision (to yourself and to others)

What aspect of this decision has special salience? What do you contrast it to? In the fullness of time when you've forgotten the nuances of your decision, how will you justify the decision to yourself? How will you justify it to others?

If it doesn’t go well, what’s the worst case scenario?

This can be useful, in terms of working out what story you might tell yourself about it.

This is also important in terms of how you frame something: if acar is a talisman about your confidence in the future, but it ends up being a lemon, you want to make sure you’re not going to suffer an additional psychological burden.

If something goes wrong, how can you turn it into a positive?

What's the outside view?

If a stranger was making the decision, what would you think?

If a friend or family member came to you for advice, what would you tell them? 

Phone a friend

When I had to make the decision about Ta’ke, I spoke to a friend whose judgement I value. He let me talk through my thinking process. It was another context for “thinking out loud”.

We were recently thinking of making a property-related purchase. I’ve spoken to several people. I’ve also engaged the services of someone to discuss it.

Step into the shoes of other stakeholders

This is a useful exercise when there is scope to negotiate cost or terms. Very often, there are more people with an interest than just the people at the table. These stakeholders sometimes have very different interests, and you need to step into several different pairs of shoes.

Map out the possibilities

I try to think of possible outcomes. I then try to estimate the relative probabilities of these scenarios.

Putting this on paper (for example, in flow chart form) can often be clarifying: commonly, the probabilities I thought I was running with in my head are quite different to what I was actually running with, once I've put them onto paper.

In Take's case, this was the part of the process which made our decision clear. 

Make a gut decision, but let your gut be informed by this process

Most decisions are ultimately driven by emotion. Gut feelings are important.

I don’t recommend building a decision-making algorithm, where you punch numbers into a spreadsheet in order to spit out a decision. (Although spreadsheets can be handy!)

Instead, I recommend trying to think systematically through various aspects of the decision, and then letting this process/analysis inform your ultimate decision.

You can be as analytical as you like. But at the end of the day, the decision will be driven by your gut.


decision making, decisions

About the author 

Sonnie Bailey

Sonnie provides financial planning services via his business, Fairhaven Wealth ( Fairhaven Wealth provides independent, advice-only, fixed-fee financial planning services. Sonnie is also a “recovering lawyer”: he has specialised in financial services, trusts, and estate planning.

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