Some people say that life is about decisions, make them and follow the result that comes out of them, accept them or carry them, either way they are there. It is true that decisions are made at every moment of life, although some are not as relevant as others, although when talking about financial decisions we must be very careful, since our assets can be put at stake.

This article is not intended to be a financial decision guide, but rather a support to understand how decision making works from a psychological perspective. Knowing how it works could help you make better decisions.

Have you ever fallen into the false idea of security? This concept is commonly seen in financial decisions such as buying a certain cryptocurrency during its all-time high, seeing an apparently favorable outlook makes it relatively easy to make a decision: buy! Something similar happens in the world of betting, think about this: a baseball team is sweeping the league, the whole panorama of the results is in its favor, without thinking twice, you bet your entire weekly payment on it and it loses. Why didn't you check statistics or extra news about, for example, the mood of the team or the atmosphere in the locker room? That's right, because of the false idea of security. Knowing this concept can help you recognize it the next time you are in such a situation.

The brain performs an equation every time it is about to make a decision. The calculation is based on the odds of reward for what it would cost to get it. The problem begins when the numbers fail. "People are really bad at those estimates," said psychologist Dan Gilbert.

Researchers at Stanford University conducted a study in which they observed the reaction of a group of people to two options. In this case the decision was simple. But when they introduced a third variable, less attractive than the previous ones, they changed their choices, even when this turned out to be irrational.

Something that according to the study occurs due to "the noise that is generated" in the decision-making process. The scientists concluded that when the brain is presented with many alternatives, it begins to ignore the less attractive ones. Although this process of selective integration leads us to value irrational preferences, it could help us make better decisions on average.

Therefore, I want to show you some simple tips that you can follow the next time you find yourself in front of a decision-making process to try to make the right one

‍Definition and formulation

Obtain information about everything that the decision to make implies, objectively analyze its causes and consequences and evaluate its importance. This is to define the situation precisely and concretely and specify what you want to achieve. Let's imagine the case of Carlos, who is not comfortable in his work.

The first step would be to specifically define what aspects make him feel uncomfortable, for example: he works too many hours, he does not get paid well, the work environment is not good. It would also imply reflecting on the degree of importance this situation has, depending on how much it is affecting him in his daily life, in this case we assume that a lot.

Generation of alternatives

Give free rein to your imagination and propose the greatest number and diversity of response alternatives, thus increasing the probability of finding the most appropriate one. This is the famous brainstorming or brainstorming whose golden rule is to postpone any criticism of the different alternatives until the next stage.

At this stage, Carlos would think about the possibilities available to solve his problem: talk to the boss, ask a professional for help to better cope with the situation. Maybe quit your job right now, go looking for a better job without leaving your current one.

Decision making

Evaluate the different alternatives considering their pros and cons to discard and thus keep the one that seems best to you. At this stage, Carlos would carry out an analysis of each of the options proposed above. For example, from the option "quit your job right now", the advantages would be: reduce anxiety, quickly eliminate discomfort, and be completely available to look for another job.

But you also have to assess the drawbacks: being out of a job, not having income for a certain time, being left without the right to a severance pay due to voluntary abandonment. This is when he has to make a balance between the advantages and disadvantages of each previously imagined alternative solution.

Implementation and verification of the decision

Apply the chosen alternative and check if the results coincide with those you had considered. Introduce, if necessary, the pertinent changes. Carlos finally decides not to quit his job right away. He prefers to talk to a partner about the situation to be able to count on his support, and meanwhile, go looking for job offers on the Internet in case there is one that matches his profile, do the interview.

As you can see, this technique is very common sense, but like the rest of the things that are also common sense, it is usually forgotten when we need it most.

And finally remember, nobody expects all your decisions to be perfect, don't put too much pressure on yourself if something doesn't go as planned, you usually have the opportunity to correct mistakes in a decision and turn the situation around for your benefit. We all make mistakes, the difference lies in those who accept mistakes and become better for it.

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