Have you ever walked into a grocery store with the intention of buying something basic — say, a bottle of olive oil — but the minute you find the right section, a “deer in headlights” feeling hits you? You might see countless choices in different sizes at different price points. How do you decide?
The endless offerings leave might leave you feeling paralyzed, to the point where you either waste time examining and re-examining bottles, get so exhausted you grab a random option — or give up entirely and leave. Why does this happen, exactly?
“It usually boils down to a few factors,” Celestine Chua, a life coach who blogs on the topic, said in an email interview. “One factor is the fear of making the wrong decision, and then overemphasis on making the perfect decision.” Though it’s tricky for everyone, this is especially tough if you a so-called “maximizer” (or perfectionist) and less of a “satisficer” who simply sets a minimum standard and accepts the next choice that clears that bar.
Now, certainly, option overload can arguably save you money if it stops you from impulse purchases. Researcher Sheena Iyengar, author of The Art of Choosing, conducted a well-known jam study in which she set up a booth selling jam, with free samples, in a California grocery store, switching from a selection of 24 flavors to an assortment of just six jams every few hours. Only 3% of customers presented with 24 flavors actually bought a jar — compared to 30% of those who had only six options. If you don’t really need jam, this result might sound great, right?
Not so fast. Under other circumstances, too many options can cause you to make a less financially savvy choice. In a study examining the retirement savings choices of more than 700,000 Americans, Iyengar and a team of researchers found that the more fund choices participants had, the less likely they were to participate in the program. In fact, plans that offered only two fund choices had participation rates of 75% — versus 60% for plans with 59 funds. That’s bad news, especially given the fact that most people are already saving too little money for retirement.
Indeed, overly-long menus can lead us to more unhappiness and feelings of regret — while sapping valuable time and cognitive energy. And, as the New York Times has reported, overload can lead to decision making that is contrary to your best interests.
From focusing on the wrong factors in a job hunt to picking the wrong credit card to making poor decisions or saving too little in your 401(k), choice paralysis can hurt your wallet — and career — in many ways.
So how can you stop this from happening? These 5 steps can help you make better choices any time you are overwhelmed by options.
1. Narrow down your list of options
Rather than trying to wrangle a multitude of decisions at once, Iyengar has suggested you first reduce the number of choices you are considering to a manageable level — to help you move forward. To use the olive oil example, you might look at the unit price for each bottle and decide you won’t buy the two most expensive brands, instead focusing on the three cheaper ones.
When it comes to weighing financial decisions, this might mean determining what you qualify for, what fits your lifestyle and what you hope to achieve. For example, when it comes to credit card rewards programs, you might reduce your list of options to the cards with credit requirements you meet — and then figure out what kind of rewards will work best for you, like cash back, airline miles or hotel points, as NerdWallet explains.
Perhaps due to a dinged credit score, you qualify for only those cards with high interest rates. If that’s the case, cut down your list to cards with no annual fees — and lower credit limits — so you have a better chance of getting approved but also paying your monthly balance in full.
2. Think through consequences
How much will this decision impact your life in the short and long term? Do you fully understand the parameters of the choice you’re about to make?
“Ask yourself whether this decision is going to impact your life one year from now,” Chua said. “If not, it’s likely not that important, so don’t spend too much time mulling over it. The time you allocate per decision should be proportional to its impact ... You should spend more time on important decisions rather than waste time on daily mundane decisions.”
So weigh the potential effects your choice could have on your financial future. In one study, when participants were told to think about the positive long-term impact 401(k) saving would have on their life, enrollment increased by 20% — and 4% of participants bumped up their savings rate, Iyengar said in a TED talk.
3. Categorize choices by objectives
Once you’ve reduced your list and know what you want in general, whittle your options down by focusing on top priorities and objectives. “Limit this to two (at most three), and rank these priorities,” Chua said.
One best way to prioritize is to evaluate each choice one-by-one and keep going until you’re left with only two or three options. During a homebuying search, for example, you might list three factors or characteristics most crucial to your decision — which might include price, proximity to work and a yard for your dog. Features like sound plumbing and updated electrical are also important, of course, but you should put your most pressing priorities first.
Or, to return to the olive oil example, once you’ve narrowed down your list by price, you might quickly look up product reviews online to rank the bottles by taste quality — or flavor profile to complement a dish you plan to prepare. Struggling to decide if reviews are good enough? Take this choice-overload advice comedian Louis C.K. shared with Billfold: If you stumble on a choice and “have someone or something that gets 70% approval, you just do it.”
4. Resist being pressured
Let’s say a grocery store employee walks by and offers to help you right as you are about to choose an olive oil. What should you do? It is certainly easier when someone else can make a choice for you — and that might be great if the decision is low-stakes, like choosing cooking oil.
But for bigger-ticket items like a home or car (or even a mattress), getting the advice of an agent or salesperson can be riskier, particularly if they are incentivized to upsell you. And when it comes to financial products, especially at a bank or brokerage company, a salesperson may push you toward products for which they earn sales incentives, as American Banker has reported.
They know you’re probably overwhelmed with the choices, so they “make the decision” easy on you by featuring just one or two products — which may or may not be best-suited to your goals. So consider conducting independent research before you meet with a financial adviser, looking at alternatives side-by-side to see which type of investment best fits your needs and checking online to see if a given product has a teaser rate or other misleading hook that drives you to buy something you may not want or need.
5. Consult with unbiased experts
Really need human help? Try turning to experts you can trust because they have no skin in the game, and have studied or worked in a relevant field — or have recently made a similar choice in their own life.
“For important decisions, like purchasing a house or insurance, get advice from people who have already done so or have done their research,” Chua said. “As people who have ‘been there done that,’ they can give you valid real-life advice on what to watch out [for], what to avoid. Not only does this cut down your learning curve, but you can build on their knowledge with your research. With real examples and reference points, it reduces [the] fear of making the wrong choice and gives you an educated point of view.”
If you’re buying a home and want to get the most house for the least price, talk to a friend who successfully negotiated down a seller. Having career trouble? Talk to several people with various paths to success for inspiration on different strategies you can consider.
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