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This is a guest post by Douglas Goldstein, CFP ®. Read more about Douglas at the end of the post.
Do you ever feel pressured by time and end up making a hasty decision that you later regret?
Chess Grandmaster Garry Kasparov taught, “Always keep ten extra minutes on the clock, or you will end up making rushed decisions.”
High level chess games are always timed.
Having time pressure keeps the pace of the game moving and forces players to make a decision.
Pressure is Bad
Behavioral finance experts study how people react when forced to make financial decisions quickly. As you might guess, when pressured to act quickly (“buy now!”), many folks will make bad decisions.
However, even if you take away time-pressure, the decision-making ability of many people doesn’t significantly improve, since their emotions get in the way.
Creating a financial plan and sticking with it helps alleviate time pressure to make money decisions. A broker advocating “Buy this IPO now!” is not relevant if the stock in question doesn’t fit into your asset allocation.
Additionally, having a financial plan helps keep you centered on what you logically want.
Ideally, creating a financial plan is as much a search into your goals and dreams as it is finding all the key financial figures to plug into your personal asset sheet.
Keeping in mind your retirement (or other long-term goals) may help discourage you from impulse spending, Make sure your financial decisions are rational, not made under time pressure or emotionally charged.
Is Time Money?
While Ben Franklin is often quoted as wisely saying “time is money,” it isn’t really true.
You can always make more money, but you can’t make more time.
So make sure you save your money, and spend your time wisely.
For more on relating chess to your finances, you may want to check out Douglas Goldstein’s book: Rich as a King.