Why people hate making money decisions — and how to plan in times of uncertainty, according to a financial coach

Kelley Holland

Many of us avoid taking care of routine money tasks, and larger financial planning, even when putting them off can actually cost us money. 

As a financial stress coach and speaker, I have seen this phenomenon time and time again — and not just among people who have trouble managing their money. Even highly successful people with a solid understanding of personal finance often avoid money tasks. Why? It's simply how our brains work. 

For one thing, our brains are often hard wired to avoid losses — and to value that avoidance more than notching gains. In evolutionary terms, that makes sense. Avoiding a predator around the next corner is more important than gathering enough food for one more meal. But when it comes to financial choices, loss avoidance can stop us in our tracks. We can worry so much about making a harmful choice that we make no choice at all.

This also applies when things are more normal and you have to consider decisions like whether to put money in a 401(k) account or how to create a budget. But this is especially the case when we deal with periods of uncertainty, like the one we're navigating now.

Emotion can complicate decisions about money

If you find yourself in a state of avoidance about your money goals, consider how you make decisions of any kind. Do you gather a bunch of data and make a linear, logic-driven choice? Or are you more likely to be guided by your emotions and instincts?

People who mainly depend on feelings and intuition to make decisions are less likely to feel comfortable in the world of finance, according to a study by Aner Sela, an associate professor of marketing at the University of Florida, and Jane Jeongin Park, now an assistant professor at the City University of Hong Kong.

"People tend to associate financial matters with a 'cold,' analytical mode of thinking that is incompatible with the tendency to experience and rely on feelings and emotions," they wrote. If they are more emotionally driven, they can feel like the world of finance is "not them."

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Interestingly, researchers found that knowing more about finance doesn't change how "at home" we feel in the world of money choices, or how comfortable we feel engaging with our finances.

Sela holds an MBA degree, and even he struggles: "I think I understand exotic financial products better than the average person, but basic financial decision making still has that flavor of going to the dentist," he says.

How to approach choices that seem overwhelming

We also turn away from financial choices due to the so-called paradox of choice.

When we are confronted with too many choices, it can feel overwhelming and stressful — and that can make it difficult or impossible to decide on a product or an action to take. That is especially true in the world of investing, according to Brian Portnoy, author of "The Investor's Paradox: The Power of Simplicity in a World of Overwhelming Choice."

"The more choices we are afforded, the more overwhelmed, less empowered, and ultimately less successful investors we potentially become," he wrote. "More is less."

We can worry so much about making a harmful choice that we make no choice at all.
Kelley Holland
Financial coach

In other words, if your employer offers a menu of 30 different investment options for your 401(k), it could actually make you less likely to choose where to put your savings than if it offered half as many. Periods of market volatility can make choosing that much harder.

All this means that if we dislike making financial decisions, it is not because we are lazy or deficient or ill-informed. We may just be hard-wired that way. But not making financial decisions can shortchange our future security.

Think about future you 

Consider the temptation to put off signing up for your employer's retirement plan, or choosing funds to invest in. Sure, you might feel less stress in the moment — but you forgo the money your employer would deposit in your account to match your own contributions and give up the chance to have your investments gain value.  

How can you overcome decision aversion? Try reframing how you think about financial choices, Sela says. 

Instead of thinking about choosing funds for your 401(k) as a financial task, frame it as a decision about the lifestyle you want down the road. As you sift through your investment options, think of the process as the means to obtain a tangible goal that's important to you, instead of something onerous or stressful.

Take a step back. Breathe and visualize your goal in your mind. Go a step further and create a vision board near the desk where you pay bills, or use another physical prompt. A former coaching client of mine who dreamed of a beach house kept a pebble from a favorite beach in her pocket as a reminder of her goal. 

You can use a similar approach with budgeting and saving. If putting away $50 from every paycheck feels unpleasant and limiting, remind yourself that it's your pathway to that trip you want to take next year. You can even open a new account and name it for your goal, so every time you get the urge to put off contributing, you see what could be possible if you keep up the habit. 

At the end of the day, few of us truly look forward to paying our bills. But those negative emotions dissipate when you start thinking of money as one more tool to improve your future wellness and well-being.

Kelley Holland, CFA, is a financial stress coach, speaker, and writer who helps women transform their relationship to money and achieve well-being.

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