A safety deposit box requires two keys being placed and turned to open the box: one by the bank and one by the owner. Financial decisions need the same thing: the keys of the left and right brain operating simultaneously. Here are six guidelines that will help you keep your limbic system and your money separate, so that the lizard in you doesn’t get to make your money decisions.
1. Avoid making important money decisions when you are emotional. Heightened emotion—good or bad—narrows your perspective, cuts you off from your sense of the big picture, and makes it more difficult to logically see the long-term consequences of your choices.
Paradoxically, attempting to use reason and logic with someone who is in a heightened emotional state only deepens the automatic alarm pattern, and will usually lead the person to dig in his heels and spiral into more extreme and less considered impulses. Empathic listening and communication of understanding are far more effective at deescalating things.
2. Avoid making important money decisions under tension or fatigue. Increased tension produces emotional regression. With increased tension and advanced conflict, the stress response reaction can move someone into a more emotional pattern characteristic of a much earlier age. The same holds true for fatigue. Make important decisions after tension has calmed and you are rested.
“Never go to bed angry” is an age-old maxim for healthy relationships, and with good reason. It’s easier to fly off the handle when fatigued and say things we might later regret. Or to buy things we might later regret. A good maxim for healthy financial life might be, “Never make important decisions after 9 p.m.”
3. Be willing to sleep on it. There are few true emergencies in life. Investing isn’t one of them, and neither is buying that plasma television. If it is a good decision today, it will be a good decision tomorrow, after you have had the state change and perspective of sleeping on it. Be clear on the distinction between being passive and making an informed decision not to act right now. “I’ll sleep on it” is a decision.
Especially in times of traumatic or crisis situations, sleeping on it can revert a “hot state” to one of cooler reason. Recognize if you are vulnerable to emotional news or gyrations in order to devise a strategy to not react in the financial arena. Limit exposure to emotional triggers, such as checking a stock ticker each day.
4. Have a well-informed and fully structured plan. Look at the big picture and your long-term objectives, and create a strategy and game plan based on facts rather than on emotions or instinctive reactions. Seek out whatever assistance you need to become fully informed on the issues involved. Periodically review your plan to make sure it is in alignment with objective expert advice by a money or investment specialist.
5. Stick to your plan. Especially in times of doing extremely well and feeling euphoric, stick to the plan. Get your excitement and take your risks in areas other than finance.
6. Worry about the right things. Decide what you can control (your plan, your actions, your decisions) and what you can’t (market conditions, external events), and put all your effort, energy, and focus into those things you can affect. When things happen that are beyond your control and that you cannot determine, stick to the plan.