The Risk of Doing Nothing

“The price of inaction is far greater than the cost of making a mistake.” –Meister Eckhart

I was recently asked, “What is the most common mistake you see when advising families with their personal finances?” I thought back on all the wild decisions and unusual behaviors I’ve witnessed over the years. While many of those stories could make for an entertaining blog, the most common mistake I see—by far—is inaction.

Money can be scary. Most financial decisions come with risks. Investing money comes with the risk of loss. Gifting to children comes with relationship risks. Giving to charity comes with the risk that you might end up needing the funds you’ve shared. All financial decisions come with some risk of regret, the “I woulda-coulda-shoulda done something better with that money” feeling.

If there is always uncertainty, how do we decide what to do? The key lies in making decisions that align with your values while knowing the tradeoffs that are part of each particular decision. For example:

• If I value community, I can gift to charities that support local families in need. The tradeoff is that I can’t save those funds for my retirement.
• If I value family, I can buy plane tickets to bring the grandchildren (and possibly their parents!) to my home for Christmas. The tradeoff is that I may not be able to go on vacation this winter.
• If I value my own appearance, I can pay for plastic surgery. The tradeoff is that I have less to give to those in need.

When you find yourself freezing up in fear, I encourage you to step back and focus on your values first. Making a decision based on values dramatically reduces the risk of regret. Then turn these values into financial goals. A goal should have a specific time and cost. If you value community, you might set a goal to give $50,000 to local charities in the next five years. Now you have a measurable objective. Financial goals are not about perfection, they’re about direction. Goals steer the process of deciding between spending, saving or giving that extra dollar in the bank or the bonus that is coming in next week’s pay.

“There are many roads to prosperity, but one must be taken. Inaction leads nowhere.”
–Robert Zoellick

If you find yourself struggling to make a decision, I encourage you to seek out an objective third party to guide you from your values to goals and your goals to real decisions. A good advisor can help navigate this process while assessing the risks and tradeoffs along the way.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Brian Cochran and not necessarily those of Raymond James.