Choosing Success

Kelechi Iwuaba

PRESIDENT BARACK OBAMA told Vanity Fair, “You’ll see I wear only gray or blue suits. I’m trying to pare down decisions. I don’t want to make decisions about what I’m eating or wearing. Because I have too many other decisions to make.”

He believed that spending mental energy to make an inconsequential decision about clothes early in the day might lead to a bad decision on a consequential matter for the country later in the day. Think about that: A U.S. president, who had access to anything and everything, put a limit on what he could and couldn’t do.

The psychological term for this is decision fatigue. According to Wikipedia, “Decision fatigue refers to the deteriorating quality of decisions made by an individual after a long session of decision-making. It is now understood as one of the causes of irrational tradeoffs in decision-making. Decision fatigue may also lead to consumers making poor choices with their purchases.”

Paradoxically, when we have limited choices, we believe we need more—and yet having more choices and making more decisions can lead to worse outcomes.

Society tells us having more is a sign of success. More information, more clothes, more shoes, more books, more podcasts, more movies, more music, more food. But the more we have, the more complex we make our lives.

We believe that freedom means the ability to do whatever we want. We might be freer, however, if we limited our options and gained more time. As Obama noted, “You need to focus your decision-making energy. You need to routinize yourself. You can’t be going through the day distracted by trivia.”

In our finances, this is vital. The more active we are in managing our money, the greater the likelihood of introducing points of failure. The fewer decisions we make, the easier it is to make reliable choices.

For me, there are two parts to limiting my money decisions: first creating my money rules and then automating how my money is managed.

My money rules are the foundation of my finances. It helps me limit the things I have to pay attention to. Here are some examples:

  • Give away 10% to 15% of my income in some way, shape or form.
  • Save at least 20% of my income.
  • Keep enough cash in an emergency fund to meet three months of my regular expenses, and six months if and when I get married.
  • Avoid all consumer debt unless I have the cash to, say, pay off the credit card bill when it arrives.
  • Have fun but don’t mess up.

I use automation to implement these money rules. It keeps my emotions from getting in the way of success. For example, before my paycheck enters my primary checking account, 20% of my income automatically gets invested.

That decision has already been made. I don’t have to make it again and again. This is especially helpful during major market downturns like 2022’s.

This doesn’t mean I won’t make changes if life forces my hand. It does mean, however, that I’m staying on the path I’ve chosen and not deviating too far from where I want to be. And if I have to deviate, I know exactly how to get back on the right path.

It seems counter-intuitive, but doing less is often the answer to succeeding financially. As we enter the new year, what are some of the money rules you’ll be putting in place? And how will you go about implementing them?

Kelechi Iwuaba is an engineer, a Nigerian-American and a self-taught finance nerd who lives in Atlanta. He loves talking about all things finance to anyone willing to listen. In his free time, Kelechi creates finance videos, records the “Rambling Mind” podcast and writes a blog. He loves volunteering at his local church and playing soccer at every opportunity. Follow him on Twitter @KelechIwuaba and check out his earlier articles.

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