The financial decisions that cause the most regret
Our Personal Finance Team At Globe and Mail we have our favorite contacts – the people we love talking to most because they deliver value to our readers in clarity, insight and integrity. One such person is Shannon Lee Simmons, a Certified Financial Planner (CFP) quoted in stories and interviewed on stress test The Personal Finance Podcast for Gen Z and Millennials. Mrs. Simmons has a new book. Decisions Without Regrets: Making Good Choices in Tough Times. On the understanding that we live in difficult times right now, I invited Ms. Simmons for a Q&A. Here’s the exchange we had via email:
Q: Your new book is called Unrepentant decisions What decisions caused your customers to regret the most?
A: Panic-based decisions that involve high emotional and financial risks. Sometimes, this is a home bought, home sold. A layoff, a job taken, a job started or finished, dealing with an inheritance, you name it. It’s not really about the nature of the decision or how it turns out to cause regret. Regret always stems from the fact that someone isn’t proud of the reasons they made their decisions when they look back.
Q: We live in a very fragile time driven by the pandemic, expensive housing, high inflation, high interest rates, and probably a lot of things. What is your best advice for helping people make calm and rational financial decisions in these times?
A: Don’t make a decision based on panic. Find a way to get yourself out of the panic so you can think clearly, see the options and make a decision that you won’t regret in the future, no matter how things turn out.
Q: How much anxiety about making financial decisions do we feel in terms of fear of disappointing others, missing out on the great things they seem to be doing and not matching their situation?
A: A lot, and I think that’s normal. Being good with money is actually just about spending less than you make each month. This is an easy calculation. The hard part is navigating the feelings behind what you earn, where you spend it and the decisions you make every day. we are human beings. Our social community means a lot to us. Therefore, we don’t want to disappoint people and we don’t want to be left behind or not fit in with our society. This is biology in action, not weakness of will. It takes an enormous amount of work to feel confident enough to say no to mandatory social spending or not to try to keep up.
Q: I like the idea in your book about setting micro-goals – it’s a comforting one when long-term goals like home ownership and a fully funded retirement seem out of reach. What could be the partial goal of a family that bought a home not so long ago and is struggling to keep up with rising mortgage payments and inflation?
A: Focus on living stipends to pay. The bigger goal is not to go into more debt if you can help it.
Q: You discuss the idea of decision predictability in the book—choosing a course of action that gives you control, or at least a sense of control. Can you tell us how you help clients make decisions that help them feel in control of their finances?
A: It is important to break down what we can and cannot control. stock market returns? Not in our control. interest rates? inflation? Housing prices and rents? No. So, the focus on what we can control comes down to the daily financial decisions we make. How much do you spend? What do we spend it on. This is all within our control.
Q: What financial decisions can you make in calm times to help you through potential future setbacks such as job loss, illness, or, to use a here-and-now example, your mortgage payment going up by $700 a month?
A: I will say this until the day I retire – a contingency account. Life will throw you curve balls. If you have a little money set aside (not invested!) for this, it will help you feel more in control and confident when life inevitably gives you lemons.
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