Decisions and Time

 

My last post delved into the concept of enough.  One of the main points was the benefit of defining "enough" prior to consumption.  The simple example is to define how many drinks I would consume on a night out.  One drink was enough.  It may be a cocktail before a meal or a glass of wine with the meal.  One drink allowed me to enjoy the evening and still make it home safely.  If I felt the desire for more drinks I would need to make alternate travel arrangements before going out.  Uber is usually one of the better options.  I am also a fan of public transit.

I just went on a cruise.  While on this vacation traveling to and from dinner was a short stroll from our cabin to the dining room.  Did this change how much I drank?  I did drink a little more but not much more.  I did enjoy a glass of wine with dinner.  Other than a cocktail during the day I did not have much else to drink.  My main reason for my one drink limit was the fear of drinking too much and driving.  However when that situation was removed my alcohol consumption did not change much.  As I said I only had one extra drink a day.  Some days I did not even have the one extra drink.  I have spent the last couple of days thinking of how my behavior reflects the decisions I make.  Do we make decisions due to our fear of possible consequences (having a DUI on our record; or worse). Or our decisions guided by higher purposes, such as moral principles and a desire to live according to a responsible code of ethics.  The simple answer to this question is obviously both.  When making decisions we often weigh all possible outcomes and then opt for the best possible option.  I could say I based the non drinking on health concerns or just the cost of the drinks.  However the truth is I never even got that far in my decision process.  Having extra drinks never crossed my mind.

So what is driving our decisions or better what should I be looking to to help guide my decisions.  Also what should I beware of that would mislead me when making decisions?  I came across this video from "Erin Talks Money".  I like Erin's data driven approach to retirement and investing.  In this video she critiques a short article from Gobankingrates.  This article looks at retirement from the perspective of our spending.  Based on how much we spend our nest egg should be "X".  There is noting wrong with the articles math.  It however ignores contributions from social security.  Social security is a mere inclusion at the end of the article.  Erin quickly points this out and then proceeds to analyze the scenarios factoring in contributions from social security.  I would encourage all of you to watch the video and how she contrasts her approach with the articles.  What I found intriguing was her concluding thoughts on the article.  These thoughts of hers begin around the sixteen minute mark of the video.

Erin begins with the phrase "know your numbers".  There is nothing complicated about these numbers.  They are how much you plan to spend and how much you will make.  How much you make is usually comprised of social security, private pensions and any side income you plan to make.  The difference between spending and income will determine how much of a nest egg you need.  There is much more leeway in the spending number.  Lets face it we can envision any spending level we wish.  Reality would be the ultimate guardrail.  Our resources (aka money) will largely impact our spending decisions. 

One of the requirements of "knowing your numbers" is having the time to gather the information to identify and verify your numbers.  I think this is the most important aspect of decision making.  One of the retirement numbers required is ones level of spending.  To get this one would have to go through bank and credit card statements.  This would obviously take time.  This leads me to my main thought in all of this.  To make good decisions you need to live a life free of uncontrolled influences.  This seems like a very heady statement so let me clarify it with some examples.

The first is the tried and true emergency fund.  Emergency funds are presented as very rational assets.  You have a sudden financial impact the emergency fund can cover it.  An emergency fund also allows you the time to make a decision without panicking.  If you experience a job loss your emergency fund would allow you the time to thoughtfully decide how this phase of your life would be lived.  Will you continue in the same career or maybe change careers.  Emergency funds will also vary based on your situation.  For example a computer programmer may feel that AI may threaten their livelihood.  I would suggest that they increase their emergency fund.  If their job is replaced by AI it may take longer for them to find another job.  An emergency fund is not only a rational resource it is also an emotional one.

Financial barriers are addressed by emergency funds (and other things such as budgets).  There are several emotional barriers affecting the time available for decisions.  Social media and the associated peer pressure is a strong one.  Seeing your neighbor with a new sports car and deciding you need one too is a decision that takes all of 5 seconds.  Seeing social media posts of a persons tropical vacation and deciding you want that experience; again 5 seconds.  No thought as to whether or not you need a car or the experience of the tropics.  I do enjoy sharing material goods with friends.  Noting better than bonding with male friends over a new power tool!  I think the key to this is whether you are sharing or comparing.  When sharing you have to take into account how your decision affects others.  Comparisons on the other hand are quick.  My neighbor has a new truck and now I have one.

Time compression is very apparent when you walk into a car dealership.  They usually get you to focus on a monthly payment number.  You may have put time into the type of vehicle you want but the salesman will try and focus you on a simple monthly payment number.  This makes the decision quick and simple.  "Can you afford $500 dollars a month?"  is a simple and quick decision.  No thought into the final cost, maintenance and finance charges.  If you are buying a $50,000 car with a 7 year loan at 7% interest you end up paying $13,000 in interest.  The salesperson definitely does not want to give you the time to goggle that!

Debt is another constraint on time.  Debts are obligations that have time limitations.  Credit card companies do not allow us to pay back the money when we choose.  The bill is due at the end of the month.  I cannot make sound financial decisions if you are constantly bumping into your debt obligations.

Financial freedom is not just a monetary windfall.  It allows us the time to make thoughtful and deliberate decisions.  I believe it also frees us from emotional constraints as well.  In becoming financially secure we foster a strong sense of self worth.  We refuse to play the keeping up with the Jones's game and allow decisions that are free of external influences.  Financial freedom is a strong  pillar in a peaceful existence.