How many decisions have you made so far today? Have you been keeping track?
Even if you’d been noticing each decision made since you woke up this morning, there’s a good chance you would have lost track by now.
Some decisions, such as whether to wear black socks or gray, seem too inconsequential to matter. Others, like deciding whether to slow down for the yellow light or slide through at the last minute, could change the whole course of your day.
It seems our minds are constantly in decision-making mode, even when we don’t realize it. Whether we make decisions quickly and clearly, or we waffle among our options, we are all required to make thousands of decisions every day for both our personal and professional lives.
Many of these decisions affect not only us but those around us. Take financial decisions. How you choose to manage your personal finances will affect not just you, but your family, too. And your management of professional finances will affect your coworkers and customers in a multitude of ways.
Here’s some positive news: You don’t need to let decision-fatigue keep you from making the right moves for your wallet. If indecision is something you struggle with, there are ways to streamline and simplify the process of choosing.
The following frameworks will help you make smarter financial decisions that will benefit you and your business.
3 Models for a Productive Decision Making Process
1. Rational Decision-Making Model – Use when trying to make the perfect decision.
This model for decision-making is exactly as it sounds: rational and logical. It requires starting at square one of an issue and walking through each logical step at a time until you come to a sound conclusion or solution.
According to Coupon Chief, “Rational decision making is one of the best frameworks for making major decisions that affect your financial status. If a decision has high stakes or is complex, use this model to make the most informed choice.”
2. Bounded Rationality Decision-Making Model – Use when trying to make a quick decision.
The bounded rationality model, also knowns as satisficing, can help you make rational decisions when you have a deadline, or even when you don’t have all of the information needed to make the best decision. The goal driving this model is not necessarily solving a problem completely but satisfying it.
According to Herbert Simon, “satisficing” is the act of sufficing and satisfying rather than optimizing when making decisions. Given limited time and information, sometimes a decision can only ever be good enough.
While we all aim to make the best possible choices whenever we can, sometimes the best choice is the one that satisfies your most pressing needs given your immediate situation.
3. Vroom-Yetton Decision-Making Model – Use when others are involved and you need to agree.
If you feel overwhelmed by the idea of using a framework for making decisions, then start with the Vroom-Yetton model. This model uses a series of yes-or-no questions to guide you to the best decision for your situation.
This is also a helpful framework to use when making decisions that affect more than one person—e.g., your family or work team.
Making the right choices can be stressful, especially if the stakes are high. Emotions can muddle the process and blur the line between right and wrong, or even good and best. Setting emotions aside and thinking through things rationally and logically can help you keep big financial decisions from getting the best of you.
Take a look at the infographic below. It should help you further understand the frameworks that can help you make sound, informed financial decisions.