“Questions Are The Answer”

4 Ways To Make Better Financial Decisions

Every day I hear another story of a financial transaction gone bad — the perils of deals too good to be true, usually consummated with people who really didn’t know one another. We somehow ignore the age old wisdom of using “an abundance of caution” and “the sniff test” when it’s more convenient to believe we’re smarter than our instincts coupled with a prudent process. And usually that’s when it happens — gut-wrenching bad. Our internal radar somehow gets tricked by rationalization. How?

What we thought we saw differs from the reality being presented. We fail to introspect and ask the right questions of ourselves or others. We get tricked by hearing all the right answers. And when it comes time to execute, schemers sadly cannot perform, and we are left with the bitterness of being bilked. As business financial stewards, we need to return to a healthy skepticism, re-tooled to thwart the sophistication of the new financial schemers. Here are some ways to start upgrading your financial radar using questions rather than answers.

“Get trusted referrals.” A trusted referral means someone having displayed the capability to assist, to advise or to solve problems in a similar situation. Asking a question like, “Can you describe a time where you’ve helped someone in my situation?” And wait for an answer. Then ask, “Was there ever another time you’ve done that as an example?” And LISTEN for the next answer. Then ask, “Can you recall any other time you might have successfully assisted someone in my situation?” Even though you may think you’re driving the other person bonkers, what you are doing is getting deeper into their background and experiences. Usually within three questions you’ll know if you are talking with a schemer or a trusted advisor.

Then check in with your intuition. If the answers felt/sounded like garble — thank them for their time and leave promptly. If the answers have depth and resonate with your situation, ask more questions. In either case the rule is the same — ask questions and listen 90% of the time. With that information, check in with some trusted colleagues, and business owners who have had experience with the advisor to validate your findings.

“Evaluate actions, not words.” Many times when you have enough pain, any salve will be appealing. The bigger disappointment is to have bought the solution that has no real value with a high price tag or high risk involved. So asking questions like, “Tell me about the time you did such and such for another owner/company?” And follow the three question rules above. “How would you go about helping me?” What is most important is to LISTEN to the answers and write down anything that strikes you as making sense, or it doesn’t make sense. If you are a visual person ask to have them whiteboard a solution or use a piece of paper to outline it. “What would it look like if you were successful in assisting me?” This helps draw out if the person is tactical, strategic (or a schemer) depending upon your needs.

When the session concludes, remember you don’t have to do or say anything other than, “Thank you. I’ll get back to you after I consider your input.” We all may think that not deciding at that moment is calamitous, but remember there’s always another deal behind the deal of a schemer. Here are some more insights in dealing with financial schemers.

“Take time to reflect.” If it’s not an emergency, why create one? Even if it is a burning issue, take time to allow your unconscious to work things over and help you resolve things in the best way possible. It’s no mystery how reflection helps make better decisions. Many wise leaders know that faster is not always better. Having a perspective and context for financial decisions is much more effective in developing financial options. So why allow yourself to be pushed into fast when high speed may end up in a crash?

“Write it down.” Many off us are visual learners. When we see the pluses and minuses of our financial decisions we can better evaluate our options. One technique is utilizing a decision tree where you outline the effects of each aspect of your decision. Another is creating a financial analysis model where “what if” scenarios can be played out and probability of outcomes validated. One does not have to be a genius to apply the tools of the better decision makers — only a willingness to learn and apply them is required. Once down on paper it’s much easier to apply the sixth sense of intuition to a solution.

As an example, I was serving in a manufacturing COO/CFO position where I walked the Plant floor regularly. I’d jot down notes in a pocket sized book on what I observed and then shared it with the management team. We used those notes to generate creative solutions to reducing inventories, raw materials and creating cash. A wise colleague showed me the technique and I became a better leader because of it. It may be index cards for you or a composition book for someone else — the point is that writing it down is a simple but effective tool for making financial decisions.

The four insights above are easy-to-adopt tools for managing financial decisions in today’s high speed climate. Information overload presents too many opportunities to confuse even the brightest individual. What remains is the confidence to make the right decisions based on what we see and hear from tasking the right questions, matched with our internal guidance system — reflection and intuition.