The new year often brings a renewed focus on planning and goal setting, from reviewing spending plans to adjusting savings and investment contributions. While these steps can help provide structure, it is equally important to recognize how making too many financial decisions too often can lead to financial decision fatigue.
What is financial decision fatigue?
Financial decision fatigue happens when making financial decisions starts to feel harder over time. Instead of creating clarity, repeated choices can lead to second-guessing, impulse decisions, or even avoidance.
For example, if your goal this year is to contribute $500 each month to your retirement fund, doing this manually can require several decisions each time. You may need to decide when to move the money, which account to use, and what to invest in. While the goal remains the same, the effort required to follow through can become a barrier over time.
Tips to avoid financial decision fatigue
Avoiding financial decision fatigue does not have to mean being hands-off with your finances. Instead, it is about being intentional about how and when decisions are made. This way, your financial plan is easier to maintain over time. Here are some tips to manage financial decision fatigue and help you stay on track with your goals.
1. Reduce how often decisions need to be made
Automating your finances can help reduce your financial to-do list. You can automate bill payments, money transfers, savings and investment contributions, and even recurring charitable donations. Not only does this reduce financial decision fatigue, but automation ensures your long-term goals are consistently met without the temptation to overspend or the need to time the market.
2. Create a set schedule for financial reviews
Regular quarterly or bi-annual check-ins can help you stay on track with your goals without having to monitor your finances too frequently. Here, you can reassess your goals, review your portfolio, and make any necessary adjustments in response to market changes or life events.
3. Work with professionals
A trusted financial advisor can help you navigate complex decisions and stay on track with your financial plan. Tax and legal experts can also provide guidance on specialized areas and help reduce the number of decisions you need to make on your own.
Financial decision fatigue can undermine your financial plan. However, taking steps to reduce unnecessary decisions can ensure you stay consistent with your long-term financial goals and provide you with peace of mind.