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January 16, 2015

Important Decisions...

Caroline Smith

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I'm not the most methodical person in the world when it comes to making decisions. I tend to go with my gut instinct a lot of the time – whether it "feels" right or not. If it does, then I go with it, if it doesn’t – well, I don’t.

But some decisions are more important or more complex than others. Deciding whether to wear the pink or the black dress today ("Black. Why? Because it’s rainy and dark outside, and I’m drawn to it!") is not quite the same as choosing between two different properties to buy, for example.

I recently had to make a similar decision recently, when my current fixed-rate mortgage came to an end: should I upgrade my existing home by withdrawing some of the capital I had made thanks to rising property prices, and maybe build an extension on the back, or should I invest in something bigger?

Now normally, I am quite decisive and am able to arrive at decisions reasonably quickly, but this was one that I kept getting stuck on. There were so many different factors at play, with far-reaching consequences, that every time I thought about it, I got overwhelmed by conflicting factors. I’d sway myself in the direction of staying put by telling myself that I would save money in sales fees and moving costs, but then I’d convince myself that moving to a larger place would provide the opportunity to add value to a more expensive property, therefore improving my long-term investment.

But then, my decision to move or extend wasn’t purely a financial one: my apartment is my home, not just an investment for the future. For instance, part of me wanted to move somewhere a little less busy, off a main road and perhaps with more of a suburban feel. However, my current home is less than a minute away from the train station and a parade of useful amenities. Did I really want to swap convenience for a quiet life?

In the end, it became too much of an albatross around my neck, and, like many decisions in my life that are too tricky to make, I choose neither and tied myself into another mortgage contract instead! I’m regretting it now, because I had the opportunity to improve my living situation, but the chance has passed now until the fixed-rate ends again.

So, this year I vowed I would become better at making important decisions, which – incidentally – coincides with today’s article on tree diagrams.

Now, if you thought that tree diagrams were just something you used to do in high school math, you’d be wrong! You can use tree diagrams to solve problems, make decisions and simplify complex issues – at work, or even in your personal life – by breaking information down into finer and finer levels of detail. This helps simplify complex problems (and their proposed solutions) and makes it easier for you to get an overview of your options.

Tree diagrams also help shift your thinking from the “big picture” to the subtleties of a project. When you first draw the diagram, you look at the issue in the broadest sense. Your focus narrows when you flesh it out, and drill down to the finer detail. This shift in perspective is especially helpful when you’re faced with large or particularly complex problems.

So for my next big decision, I’m going to be more methodical and have a go at drawing a tree diagram to explore my options. Specifically, I'll use decision trees to help me make my financial decisions, i.e. between two investments. And, if I wanted to bring non-financial factors in, I'll also use Decision Matrix Analysis, or a combination of both, so that I know I've weighed up all of my options.

Check out today's article to learn more about different types of decision diagrams, and how you can use them, too.

Question: Have you ever drawn a tree diagram to help you make a decision or solve a problem in your life? If so, we’d love to hear from you below!

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3 comments on “Important Decisions...”

  1. Great timing as I am currently struggling with a big life changing decision. Even though I know I will ultimately make a 'gut' decision, I want to have the logical/analytical stuff down to justify which route I take. Thanks

    1. I was extremely pleased to uncover this great site.I need to to thank you for ones time due to this wonderful read!! I definitely appreciated every part of it and i also have you saved as a favorite to check out new things in your site.

  2. Thanks for your comment, Bree. I think instinct and intuition are important. Something has to "feel" right. But being analytical about a decision is important too, particularly with big, financial decisions.

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