Formulate a Financial Plan

Know Your Net Worth

Manage & Minimize Debt

Accumulate Assets

Budget to Live Within Your Means

Understand Investing Basics

Plan for Retirement

Insure People & Property

Deal with Financial Advisors

Review Your Employment Contract

Make Plans for Your Estate

Make Good Decisions


You made it this far in your career because you can make professional decisions decisively. You don’t shy away from a medical diagnosis, and you do what is necessary to provide your patients with the best care. But somehow, when it comes to making financial decisions, you’re much less comfortable being decisive.

Why is that?

There are several potential reasons. Some of the ones reported by doctors include:

  1. Not knowing where to start. Financial markets are chaotic and confusing. It’s like having to learn a different language, and regular intuition doesn’t seem to apply
  2. Not knowing whom to trust. The people offering you products and services all have their own agendas, and there’s a lingering sense they may not have your best interests at heart
  3. Feeling incompetent. Lack of knowledge makes us feel uncomfortable and vulnerable. Doctors are accustomed to having answers and being in control. Acknowledging financial incompetence feels like admitting to having a weakness
  4. Discomfort with talking about money and financial decisions. In some cultures or families discussing money-related matters is taboo

As you undoubtedly learned from reading this book, there’s good news and bad news.

The bad news is that you must make financial decisions. Hopefully the earlier portions of this book covering axioms, imperatives, and time value of money made it clear that procrastination is not an option. You must make some decisions early on, and you must make them competently—a lot is riding on it.

The good news is that you have the mental capacity to understand finance. The subject matter may be annoying, it may be boring, and it may be voluminous, but it’s not rocket science. It’s nowhere as complex as pharmacological principles, reading an X-ray, or performing surgery. Furthermore, while the relevant content may seem overwhelming—it is finite. You can cover the basics in ten hours or less. Getting your arms around the content gives you the confidence to make decisions and deal with advisors, brokers, and agents.

But before you get too comfortable and run out to make decisions it’s important to recognize that we all have a predisposition to act impulsively. When it comes to financial planning it’s crucial to be very deliberate. Failure to do so invites self-inflicted mistakes as well as manipulation by market professionals selling financial products.

One line of defense is awareness that various psychological decision-making biases exist.

Another line of defense is advance preparation. In this chapter we address the former—awareness of the biases. We address the latter—advance preparation—by being proactive, which is to say, taking to heart the content of this book, and discussing decisions with our spouse or partner, or some other family member or best friend.

I begin this chapter by outlining two decision making paradigms. I then identify several well-documented psychological barriers that often conspire to undermine our decision making.