LAST SUNDAY, I discussed six strategies that could help you avoid decisions you’ll regret. But what if it’s too late—and you’ve already made a financial choice that’s left you unhappy? Now what?
Below are six notions to help you manage, and hopefully minimize, your regret over past decisions:
1. Your imagined happy ending likely wouldn’t have happened. Back in 2004, I recall seeing an iPod for the first time. A co-worker had received one for Christmas. It was clear what a great product it was. Apple’s share price at the time? About $4. Today, of course, it’s around $460—more than a hundred times higher. So how many shares did I purchase at $4? Zero.
I don’t spend a lot of time thinking about this. But if I wanted to wallow in regret, the math would be easy. A $1,000 investment back then would be worth some $115,000 today. A $5,000 investment would have put my children most of the way through college. In theory, at least. But here’s the reality: It probably wouldn’t have worked out that way. My guess is that no one short of Rip Van Winkle would have held onto Apple—without selling a single share—over that many years, even as its value multiplied so many times. It just isn’t realistic.
But unfortunately, our minds aren’t perfectly rational. It’s all too easy to compare what actually occurred to an imagined, and highly romanticized, version of what might have been. What we conveniently overlook is all of the other less-than-wonderful ways that things might have turned out. One regret, in fact, might simply have replaced another. Suppose I had bought those Apple shares at $4. That would have been great, but I can imagine what might have happened next. A year later, after the price had more than doubled to $10, I could easily have sold the shares, reasoning that it would be foolish and greedy to hang on for further gains.
The bottom line: A key strategy for overcoming financial regret is to recognize that things might not have—and probably wouldn’t have—turned out to be the fairy tale that our minds imagine.
2. Bad outcomes don’t necessarily result from bad decisions. In recent months, while most stocks have struggled, a group of technology stocks has been seemingly unstoppable. In addition to Apple, this group includes Alphabet (a.k.a. Google), Amazon and Tesla. If you had sold shares in any of these companies this year, you might be regretting it. But what we overlook is that things could easily have gone the other way for these stocks.
Poker champion Annie Duke talks about the concept of resulting. This occurs when our minds mistakenly conclude that a bad outcome was the result of a bad decision. This applies as much to investing as it does to poker. The particular nature of the COVID-19 crisis just happened to benefit technology companies—but that wasn’t preordained.
Imagine if things had developed just a little differently. Imagine if Apple’s production lines in China had been shut down for several months due to the virus, or if Tesla’s production in California had been impacted more than it was. Those things might well have happened. And if that had been the case, those companies might be faring much worse than average, rather than better. The bottom line: We shouldn’t criticize a decision that made sense at the time using the facts then available.
3. Mistakes are part of life. No one moves through life seamlessly, making flawless decisions at every turn. But because most people don’t like to advertise their mistakes, it may appear that others are making all the right moves. Rationally, though, you know that can’t be true. If you find yourself stuck ruminating over a financial mistake, look at it this way: Yes, the circumstances of a particular mistake might be unique to you, but it isn’t unique to make mistakes.
Once you accept that we all make our fair share of mistakes, I think it’s easier to put things in the past—where they belong. In fact, “mistake” may not even be the right word. I always think of Michael Jordan’s comment: “I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. Twenty-six times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life.” In other words, no one wins them all—not even Michael Jordan.
4. When one door closes, another opens. This may sound like a cliche, but it’s often true. Think of Steve Jobs. Only upon reflection did he see how the setbacks he experienced early in his career benefited him later on.
“You can’t connect the dots looking forward,” Jobs said. “You can only connect them looking backwards…. It turned out that getting fired from Apple was the best thing that ever could have happened to me.” Be careful not to judge anything over too short a time frame. Today’s mistake may end up being an invaluable building block toward something better down the road.
5. It may not even be your fault. One reader visited the World Regret Survey, which I mentioned last week, and then emailed me with the observation that all the regrets seem to fall into one of two categories: mistakes for which we blame ourselves and mistakes for which we blame others. It’s a great observation. What I would add is that it’s easy to confuse the two. Sometimes, we blame others for our own problems. Sometimes, we blame ourselves for things over which we had no control. Both are mistakes.
6. Money matters, but it isn’t the only thing. When all’s said and done, money is just one aspect of our life. In fact, if you read through the World Regret Survey, you’ll notice that a majority of the regrets submitted are not money related. Most regrets have more to do with personal relationships.
It’s an important lesson: Sure, you might have a financial regret or two—or maybe more—but that’s just one piece of the puzzle. If you find yourself ruminating over a financial decision, try to broaden the lens. Ponder everything that has gone well or is currently going well. The past doesn’t care if you ignore it—so go ahead and leave it where it belongs.
Adam M. Grossman’s previous articles include Minimizing Regret, Don’t Be That Person and Skewed Impression. Adam is the founder of Mayport, a fixed-fee wealth management firm. In his series of free e-books, Adam advocates an evidence-based approach to personal finance. Follow Adam on Twitter @AdamMGrossman.
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What a good read Adam, interesting that if 8 things in a day go great and two go bad we focus on the two bad things. Human nature? It followed me into retirement.
Thanks, Charlie. I entirely agree. It’s all too easy to take for granted everything that goes well or exactly as planned.
Great article, Adam. I’m really interested in “resulting”. It seems so common – we all want simple cause and effect.
Thanks, Rick. It’s easy to fall into the trap of resulting because (a) We’d like to think we have control over the things that happen in our lives; and (b) It may feel like we’re just “making it up” if we try to tell ourselves that things could have turned out differently.
Thanks for the article! I’ll try to use these techniques next time I’m feeling regretful.