The Decision Spiral

Most of us are pretty familiar with the concept of a downward spiral of decisions. When we make a bad choice, it puts us in a slightly weaker spot, where our options aren’t as good as they once were.

Here’s a good example: you choose to spend $100 on an expensive meal for yourself and an old friend that you don’t see very often. That old friend would still be your friend anyway and that meal is digested and forgotten in a day or two, so basically you’re just out $100.

Two days later, you have a chance to buy something you’ve wanted for a long time with that same $100. If you hadn’t purchased that expensive meal, you’d be able to buy that item easily. However, without that $100, the decisions are a bit bleaker. You might be able to afford it, but then you’re either adding to your debt load or making things really tight for the next few weeks (in which case an emergency could really hurt).

You’ve just experienced a downward decision spiral. What happens if you make another poor decision? You decide to buy the item – and it’s used – only to have it break in a few days because you didn’t inspect it well, or find out that you didn’t really like it all that well after all. Then you’re out another $100, making all of your decisions even tighter for a while and potentially even worse for your debt standing, furthering that downward spiral.

Now, let’s look at a different spiral. You choose to take your friend out to eat, but you go to a place that charges only $20 for the meal. Then, you have that opportunity to buy something you’ve wanted but you take the time and inspect it, noticing the flaw and keeping the money in your pocket. You’re financially stable and at the end of the month, you have some good options with your money: an extra Roth IRA contribution, building up your emergency fund, paying down a debt, or even something fun.

That’s an upward decision spiral. Every good decision you make leads to a better set of decisions in the future.

The truth is that most of us amble through life at a relatively steady pace, mixing enough good and bad decisions together so that we rarely find ourselves in any kind of spiral. We might find ourselves in a downward decision spiral for a while, but then at a later time, we’re on an upward decision spiral for a while.

In my own life, I spent a few years in a pretty clear downward decision spiral. I spent far more than I earned on a bunch of completely forgettable things. I paid an obscene amount of interest on debts. I didn’t build towards owning a home or even being able to buy my next car without taking out a loan.

Eventually, I reached a point where my options were pretty limited and all of them were terrible. Bankruptcy? Selling off a ton of my stuff? Walking a frighteningly tense tightrope at work because a pink slip would be incredibly disastrous? Beginning to be worried about making sure my infant son has everything he needs? All of those things were on the table thanks to my downward decision spiral.

After that, I’ve spent a number of years on a pretty clear upward decision spiral. I started spending far less than I earned. I built a side business that eventually became my full time employment. I spent my spare time building a few passive income streams. Eventually, I paid off all of my debts and we moved to a situation where we essentially live off of one salary.

Right now, my options look completely different. I could go back to school if I wanted to, in pretty much any area. I could keep building passive income streams and actually retire early in a surprisingly small number of years. Sarah and I can both retire in a decade or so, though Sarah really does love her career and will probably stick with it for quite a while longer. All of these things are on the table thanks to my upward decision spiral.

I will tell you, without a doubt, that getting yourself into an upward decision spiral is well worth a lot of personally hard choices and personal sacrifice. All of the effort to turn my downward spiral around and turn it into an upward spiral – and it was a lot of effort – was well worth it.

Turning Around a Downward Spiral

So, how do you turn around a downward spiral when all of the choices in front of you are terrible? Here are a few strategies that will always work.

First, start thinking outside of the box. Often, you have more choices in front of you than you initially see. If you’re having trouble putting food on the table, have you looked around for sources of free food, like food pantries or community dinners? If you’re struggling to pay off your bills, have you looked into debt consolidation options or talked to people at your local credit union?

Look around your community for new ideas. Don’t be afraid to ask for help, especially at places like city hall and local churches. Join your local community Facebook groups and search through their archives for good suggestions because it’s very likely someone has asked for such ideas there.

Your choices aren’t as limited as you might initially think. You just need to expand your horizons a bit.

Second, don’t trick yourself into thinking that your little decisions don’t matter. They do. It is really, really easy to convince yourself that spending a dollar here or putting off this task for a day over there won’t really add up to any sort of significance. The thing is, it does. Those things contribute to the downward spiral.

Every little positive choice you make is a good one. It slows down that downward spiral just a little bit. In fact, you may not even notice the change at all, but it’s there. That extra dollar in your bank account pairs up with other dollars from other good choices. That time invested in taking care of something now causes that good thing to start even earlier and gives you time for other things later on.

Sure, they’re little drips and drops, but those little drips and drops can eventually fill up a swimming pool. They make a huge difference in the long run.

Third, do some advance thinking about your little decisions. I find this incredibly powerful, even now.

Sometimes, the best decisions aren’t immediately obvious. Sometimes, our instincts are wrong and sometimes our desires are strong enough to pull us in the wrong direction.

The most powerful way to overcome this is by carefully thinking about past decisions and mentally reviewing how you’ll handle similar decisions in the future.

I’ll give you an example. Let’s say I stopped at the gas station and decided, on the spur of the moment, to buy two bottles of Gatorade, as they’re on sale for $3. (I have always liked the taste of Gatorade…) Was that a good decision? In that moment, I saw that they were on sale and equated that to a bargain, but if I step back… did I really need that Gatorade at all? Was that $3 worth it?

After reflecting on it a bit, I realized that it really wasn’t the best idea to jump on that sale. I don’t really need the Gatorade anyway. So, instead, I think about the next time I visit that gas station. I’ll pass up that sale. In fact, I visualize myself doing just that.

It helps more than you might think. I find that I often follow in the tracks of whatever I visualized, whether I’m actually remembering that or not.

Finally, never, ever expect perfection. You are never to make perfect decisions all the time, and you are not a failure when you make a terrible decision.

A terrible decision is actually not that bad of a thing. On the one hand, it is good that you recognized the decision and why it was terrible. The fact that you recognized it as a bad choice and didn’t give into the temptation to justify it is a sign that your mindset is in a more positive place than it once was.

On the other, you now have a chance to think through a better way to make that decision (and similar ones) in the future. You can (and should) visualize how to make a better choice down the road.

Mistakes happen. The question is how you choose to move forward from that mistake.

Switching to an Upward Spiral

Once you start putting the brakes on a downward spiral through the steps mentioned above, you’ll start to notice that the decisions available to you aren’t as bad as they once were and they’re not buried in a heap of stress. That’s the power of little good choices at work – they’re slowly starting to work together to make better choices for you.

In my eyes, the point at which a downward spiral begins to turn into an upward spiral is when most of the options available to you aren’t stopping something bad, but building to something good.

For example, when you’re in a downward spiral, even the good choices mostly serve to simply slow down the financial losses. Paying down a credit card debt, for instance, doesn’t mean that you’re planning for the future. It simply means that your checking account isn’t losing money to the interest monster quite as quickly as before. It’s like putting some dressing on a wound to stop the blood flow.

On the other hand, when you’re on an upward spiral, the good choices generally accelerate more good choices. Choosing to put money into investments, for example, opens the door to some pretty powerful lifestyle choices down the road, things like not having to work any more unless you want to.

How do you hop from one to the other?

First, get rid of the financial negatives in your life. Anything that consistently causes money to leave your bank account without giving you anything worthwhile in return is a financial negative.

Debt is virtually always a financial negative. Get rid of it. Subscription services you don’t use are a financial negative. Get rid of them. People who borrow money from you and never pay you back are financial negatives. Stop lending them money at the very least.

Those things just scratch the surface. Scour every reason that money leaves your accounts and ask yourself whether you’re actually getting any value from them. If an answer isn’t obvious, it’s probably a financial negative, and you need to get rid of it as soon as you can. Those things should be your top priority.

Second, make yourself financially nimble by minimizing your expenses as much as possible. The fewer expenses you have, the better.

Why? Lower expenses means that you’re going to have more money left over at the end of each and every month. That money immediately translates into things like paying off debts, building an emergency fund, and so on – moves that either slow the downward spiral or start building an upward spiral.

It’s not that difficult, either. Just choose to engage in free and low cost activities for fun (there are thousands – try a few of them). Eat more meals at home. Start commuting to work more efficiently, whether by mass transit or by carpool. There are lots of tactics you can use to minimize expenses.

Third, look through your life for opportunities that either gain money or else provide other benefits without costing money. One of the most powerful things you can do in your life is to start training your eyes to look for the truly good investments around you.

Some things are an automatic return on your money, like contributing to a 401(k) with a strong employer match program, buying nonperishable items that you’ll use regularly in bulk (trash bags, for instance), or installing LED lights throughout your home.

Other things make your life better without any real cost. I highly value a simple afternoon doing things like geocaching or reading a good book in the hammock. Those are rewards that have intrinsic life benefits for me and improve my quality of life, but they don’t involve any sort of cost.

Finally, make broader lifestyle choices that make better moves easier. Look for ways to use your time to unlock better choices for you.

For example, instead of watching television or surfing unfulfilling websites in the evening, spend that time taking an online class at OpenCourseWare or Coursera or Code Academy – or even reading a challenging book. Instead of sitting around at home, join a community organization and get involved (the social networking alone will open up opportunities). Instead of sitting up in a half-awake stupor, just go to bed when you feel drowsy and actually get adequate sleep. When you have a choice of activities, choose one that pushes you a little in a mental or physical way.

Choices like this constantly improve your options down the road. They increase your skill set, improve your health, increase your social network size and quality, and so on. Down the road, when options appear on the table for you, you’ll have access to better choices because you made smarter choices now.

This is the real start of an upward spiral.

Accelerating an Upward Spiral

Your upward spiral really takes hold when most of the choices available to you have a positive outcome that further increases your positive options in life. This generally happens when you start to approach zero debt, you have steady income sources, and you have money in the bank and insurance to protect you from calamities. Your options are good and they’re only going to get better.

So, how can you accelerate that improvement?

First, prioritize choices that have a strong chance of opening up more and better choices in the future. Don’t look at what the best choice is for today. Instead, look at what creates the best choices down the road.

In general, things that cost less are choices that open up better options down the road. Being social and taking social leadership positions do that. Getting mental and physical exercise achieves that goal.

Obviously, you won’t always want to make that choice as it will make today’s life utter misery. However, you should be striving to make that kind of choice as often as you can, especially when it doesn’t have a real negative impact on today.

Second, invest sweat equity into something you love. What do you truly love doing? How can you raise that skill to the point where people will pay you for doing just that with minimal interference?

I always dreamed of being a writer, but I learned that I would never be a writer unless I started writing and I started sharing the results with as many people as possible. What happened? I eventually wound up being a full time writer, but it didn’t happen until I invested a ton of effort into it without much return. There are countless examples of this from people with different passions.

The thing is, investing all of that sweat equity isn’t bad if you’re actually passionate and in love with what you’re doing. I love to write. I write 20,000 words per week at a minimum – and I do it week after week after week. Why? I love writing. It was only through investing a lot of my spare time actually writing – and not earning much for it – that I was able to wind up writing for a living. It was pretty clearly an “upward spiral” choice.

Third, live on substantially less than you earn and invest the rest. You don’t need to completely minimize your spending – that kind of attitude really serves you best when you’re turning around your finances – but it doesn’t change the fact that living on less means that you have more and more options faster and faster.

Sarah and I live on about 50% of our income (it’s actually around 48% so far in 2015). The rest goes into investments. Sure, we could spend more, but why? It doesn’t really gain us anything that we can’t easily live without while still having a life that makes us happy. (We invest the rest into a simple set of funds in Vanguard.)

Having that kind of money in the bank makes life easier and gives us infinite options which grow every single day.

Finally, learn about how to invest. Investing isn’t some mysterious black art that you have to hire someone to do for you. It just takes some time to learn what it’s all about, and when you understand it, you can control it for yourself and not pay out an expensive fee to have someone do it for you.

Take the time to learn how to invest. Grab a few general investment guides at the library (anything with the word Bogleheads in the title is a good place to start) and read them slowly, looking up any terms you don’t understand.

You’ll soon recognize that investing isn’t the difficult task you once thought it is. In fact, investing is just a tool that can help you rapidly accelerate your upward spiral once you understand it and take control of your choices.

Final Thoughts

Figuring out that I was on a downward financial spiral and making the (huge) effort to turn it into an upward spiral was the single best decision I’ve made in my life (aside from getting married and having children). It was hard. It meant giving up some things that I loved. It meant uprooting a lot of routines. It meant spending a lot of time looking at my decisions and fixing them.

The rewards, though? They are truly life changing. The switch can take you from constant job stress to self-employment doing what you love doing most. It can take you from a tiny apartment to a house with plenty of room for your whole family. It can take you from unbearable stress to inner peace.

It’s well worth all of the hard work.

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