Have you ever spent so much time working on finding a “perfect” solution that you inadvertently made your life way harder?
Maybe you were so obsessed with fine-tuning a project that you busted a deadline. Or maybe you spent so much time researching the perfect gift for somebody that you ran out of time to order it. Or maybe you’ve been suffering from “analysis paralysis” — you want the absolute best outcome, but you’re so saturated with the amount of information you’ve sought out that you’ve barely started making actual progress.
As someone who loves editing and research and optimizing things, I can absolutely relate. In fact… I just got home from picking out a plant pot at our local nursery. There were so many options, and while I only needed one, I started thinking about shuffling some of my other plants around, and then wondering if the size and the drainage would be right for those other plants… and before I knew it, almost an hour had gone by. I was tempted to do the cutesy writer thing and pretend like the idea for this post came to me while I was there, but the truth is, I had already written half of this post beforehand.
One hour. On a single plant pot.
I’m not proud of this.
HOWEVER. Horticultural purchases aside, I really have been working on getting out of my own way. I may have, at one point, had the attitude “Why wouldn’t I want to be perfect? That’s literally the best thing you can be!” But while the pursuit of excellence is a noble endeavor, being a perfectionist is usually destructive. Besides costing you time and mental wellness, it may also be costing you a lot of money.
Are you a maximizer or a satisficer?
Psychologists think there are two broad categories of decision-makers: maximizers and satisficers. Maximizers are obsessed with finding the best solution, where satisficers (this is an awkward portmanteau of “satisfier + suffice”) find the answer that is “good enough” to meet their criteria and move on with their lives.
Maximizers fall victim to perfectionist thinking, which means that they usually take much longer to make a decision because they’ve got to investigate every single option. They’re constantly second-guessing themselves, worrying and wondering whether something else might have been better than what they ultimately chose. And they’re less likely to be happy with their actual outcome.
Although I haven’t personally run any studies to support it, I have a sneaking suspicion that many of us are a combination of both, depending on the situation. For example, Mr. Fortuna is a maximizer about cars and a satisficer about personal care products; I’m the exact opposite. I think we can all fall victim to maximizing when it’s something that we have a lot of energy around — whether that energy is excitement or anxiety. And I don’t know anyone who doesn’t have some kind of energy around money.
How this can hurt your bottom line
Maximizing creates all kinds of financial dangers:
- Over-researching the best methods for dealing with their debt – snowball? avalanche? consolidation? refinance? – without actually moving the needle on the debt itself.
- A maximizer might over-save past a healthy emergency fund target. Or they might put the emergency fund in investments to get the “best return,” overlooking the risk factor. Or they might wind up with choice paralysis and leave the emergency fund overly accessible, dipping into it way too often.
- Maximizers might spend hours poring over credit cards to find the best possible rewards perks and end up with multiple new cards in their wallet and a corresponding hit on their credit score.
- There are so many ways a maximizer could get into danger with investing: they could be way too risk-averse, or too aggressive, or way too involved in their accounts. Maybe they spend a lot of time trying to time the market or find the next meme stock. Or, worst of all, they might put off investing until they find the absolute perfect time/amount/financial advisor.
A satisficer making the decision to clean up their debt or create an emergency fund or invest will just… do it. This means that acting like a satisficer may help you come out ahead — if your ideas of “good enough” are grounded in solid principles.
Satisficing your way to wealth
Time for another embarrassing admission: after I finally made my decision, I brought home my plant pot and found out it was too small for the plant I wanted to repot.
I was operating with insufficient information, and I chose something that literally didn’t fit my situation. So if you’re trying to act more like a satisficer, it’s key to make sure you’ve defined your “good enough” without being too optimistic.
Our recommendations for good “satisficing” here would be:
- In most cases, the debt snowball is the best method for debt elimination because it harnesses human behavior and gives you the momentum of little wins.
- Consolidating or refinancing can be helpful for some types of larger debt (if the overall interest rate gets reduced). If you have to pay to consolidate, if you have to pay too much to refinance, or if you’re only trying to change the terms of the loan(s) instead of the interest rate, you’re better off just buckling down on the debt.
- A healthy emergency fund target is usually 3-6 months of expenses (not income!). You want to weight towards the heavier side if your household is single-income or if one or more of your sources of income tends to be volatile.
- Put your emergency fund in a high-yield savings account or money market fund at an online bank that isn’t your primary financial institution. You want it to be a little bit hard to get to, but still available in 24 hours or less.
- The most important thing to do with investing is to actually do it, starting with about 15% of your monthly income. Take advantage of any employer matching contributions, and any other tax-favored investing options open to you (for example, a Roth IRA).
- It’s ok to be aggressive with retirement investing if you’re more than ten years out from retirement. It’s really good to pick index funds with long (10+ year) track records of high returns and lowest-possible fees. If that overwhelms you, it’s also totally ok to pick a “target retirement date” fund.
At the end of the day, I’m not stressed about the plant pot. It’s pretty cute, and I definitely have another plant that I can put in it. But before I go back to the nursery, I’m going to take some measurements.
Perfection not required
If you’re following our approach, perfection isn’t required. We don’t believe there’s one single magic trick that will get you to financial well-being. (Although getting out of debt comes close.)
We won’t give you a plan that relies on everything going exactly right in order to meet your goals. Perfect is impossible, but “good enough to get rich” is absolutely within reach.
We want you to have multiple sources of stability and prosperity.
We want you out of debt because we want you to have total control of your income so you can live a joyful life now and in the future. If life throws you a curveball, debt compounds your stress and limits your options.
We want you to have a solid cash cushion so if one thing goes wrong, you can handle it right away instead of diving back into debt.
We want you to invest as soon as you’re out of all non-mortgage debt and you have a healthy emergency fund, because compound interest makes you richer while you sleep.
And we also want you to have room for joy while you’re working towards these goals.
If you’d like help figuring out how to get on the “good enough to get rich” train, please reach out.