How Small Choices Can Have a Big Impact On Your Money

I spend a lot of time helping people make financial choices, sometimes about business and sometimes about personal life. In both cases and in many more, breaking huge issues and questions into smaller choices makes problems much easier to manage.

Big financial decisions, depending on your age, include getting married, buying a home, paying for college, securing enough insurance and retiring, to name just a few. Everything from nosy relatives to the latest market and international news pressures all of us to solidify these moves financially as soon as possible.

You can start with a financial plan, a written idea of big goals for your savings and when you want to hit those goals. Along the way, though, the problem arises when you try to decide too much too fast (in Great Britain, for example, some homebuyers ink a deal in as little as half an hour). People generally make most decisions under time pressure yet most decisions – let alone big financial ones – also take a lot of time, according to one study from the American Psychological Association.

Break big decisions into simple steps.

Stay away from sunk costs if you lack the time to recover

When you spend months and months planning something – a big purchase, a major investing initiative – you may have a hard time backing away. A sunk cost is one you already made and can’t get back, at least easily, so you feel committed. Most of the time you’ll need to retreat, if for no other reason than to reconsider once more. You never get back this planning time.

Better to start fast, move fast, change fast and stop fast. All of these are easier when changes are small and are almost impossible with big changes. Fail fast and fail cheap: Recover quickly from your missteps and move on.

Rarely does one of my ideas come out right the first time. I usually keep modifying and modifying – and then it’s still not right.

But the smaller the change I work on, the easier the change. If I spend days, weeks or months planning how to tinker with a major idea, that idea is going to be hard to change to fit evolving conditions, such as the stock market’s ups and downs.

Small choices are not complicated

Deciding what to do next when it’s a small choice is easy.

Keep questions about scrimping and saving for the future simple. Do you really need that top-of-the-line laptop or will a cheaper model do? How much can you save now?

After you get that raise at a plum new job, can you save more? What are the best investments for the next few years and how can you easily shift your retirement plan money to them?

Do you have lots of extra time for big projects? I bet no. But I bet you can always find time for a question that takes 15 or 20 minutes to answer. The small gets done easier than the big.

Yes or no becomes easier

Big projects come with big commitment if you say yes. If your choice involves a small matter, though, yes or no involves no big subsequent process. You also often get to start quicker – sometimes a big consideration in such aspects of financial plans as saving.

Small adds up to big

Cut a big project down to the smallest parts you can. Keep up with mortgage payments each month; open an individual retirement account; spend that half hour online not buying a house in the mountains, but Googling more sources of college financial aid.

When you string together a bunch of small projects, they become the big project: your mortgage paid off, your child’s tuition paid, your golden years spent in comfort. Communicate about finances with your spouse. Set your priorities. Create and, as time goes by, adjust your plan.

Make it small and make it easy.

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Written by Josh Patrick. Josh Patrick is a founding principal of Stage 2 Planning Partners in South Burlington, Vt. He contributes to the NY Times You’re the Boss blog and works with owners of privately held businesses helping them create business and personal value. You can learn more about his Objective Review process at his website.

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