Thursday, October 17, 2013

Money Fears: Making the Wrong Decision


Have you ever thought about how much money you spend every year because you were afraid to make a financial decision? And it’s not just financial decisions, but all of those other decisions we make: moving, changing service providers, switching policies or any of the other decisions we make every day that impact our bottom line.

I know exactly how much I spent this year because I was afraid to change life insurance carriers: $516. I’ve been meaning to change for quite some time as I’ve watched my rate climb from $28 to $33 and then finally to $99 per month. Partly it’s just the annoyance of it all: the paperwork, the medical tests and the endless questions. But part of the avoidance is unfounded fear. What if I don’t pass the medical test? What if moving away from the blue chip company I’ve been with forever turns out to be a bad idea for my beneficiary? What if I make the wrong decisions about the distribution of the proceeds? What if something goes wrong and then I have no life insurance at all?

I realize that these fears are mostly unreasonable, but in my years of talking to others about why they don’t make movement on financial decisions, the reasons are usually peppered with unfounded fears. And of those fears, many are often “the unknown.”

In our Finance Boot Camps, one of my favorite questions is “what would happen if you did nothing?” It’s always a bit of a startling question, because who ever brought the topic to the table that session obviously wants to do something. Asking someone what would happen if they do nothing is a supportive slap in the face. “I’d continue to pay $516 more every year, and probably even more as I reached 50.” That’s not much of a decision. Move life insurance companies.

Over the past few years, I’ve seen this play out many times over with people’s homes and underwater mortgages. Their logic is often sound: they want to be responsible for the mortgage they signed on the dotted line for. There’s a flip side to the logic, though: is it sound to pay tens of thousands more than the value of something? If your mortgage is in the poor parts of Detroit, the decision would be easier. But for those in better markets where values dropped, but not by as much, what is the right thing? And how much of decisions, or indecisions, are driven by fear of the unknown?

My most frequent advice is “do your numbers.” Writing your numbers down, looking at what will happen in the future if you do nothing, looking back and becoming clear about how much you paid for something that you didn’t make a move on in the past brings clarity to your decision, and takes a level of fear away. Once I sat down and penciled out my insurance numbers, it was obvious that it was past time to make a move.


Do you have any financial decisions you’ve been avoiding because there’s some fear floating around the issue?

-Stacey Powell

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