Decisions That Minimize Regret

Have you asked yourself what you would regret (not having done) if you were to get hit by a bus tomorrow? Each of us may end up rich or poor, single or married, relatively young or well past the average life expectancy at the time of our death. However, I recently read an article written by a former doctor who said that among dying patients, those who had the fewest regrets had the easiest time facing the great unknown. So how do we minimize regret?

Jeff Bezo’s decision framework to minimize regret:

If you google “regret minimization,” you are bound to find an anecdote about Jeff Bezos and his decision to leave a good high paying hedge fund job to start Amazon.com. Here is what he had to say:

“…‘Okay, now I’m looking back on my life. I want to have minimized the number of regrets I have.’ I knew that when I was 80 I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day, and so, when I thought about it that way it was an incredibly easy decision.”

Financial planning uses rules and guidelines to help us accumulate wealth, pay fewer taxes, and maintain our current standard of living. Financial advisors (and their clients) are frequently trying to predict what will happen. Naturally, many things are impossible to predict or control. There is always a chance that in retrospect, the best decision you could make at the time will turn out to be absolutely wrong.

Financial decisions and minimizing regrets:

Let’s look at minimizing regret from a financial planning perspective. Suppose you are deciding when to collect Social Security. You could collect early (62), at your full retirement age (66), or defer to age 70. This decision (mathematically) is a bet on longevity. If you defer until age 70 and die prior to age 81, you will collect fewer dollars than if had you claimed benefits earlier. On the other hand, you would collect more money if you deferred to age 70 and lived well into your late 80s or 90s. The question is which decision (assuming you got it wrong) leaves you with more regret: collecting early and living to 90 knowing that each check is smaller than it could have been, or dying too soon and knowing that you missed out on collecting benefits for a few years in your early 60s?

You can look at all financial decisions through this regret minimization framework. What would you regret more: spending money today and then not having it in the future when you need/want it, or saving for the future and not getting a chance to enjoy it? One more example, what would you regret more: missing the bull market, or being invested when the market declines?

Regret minimization: the core principle of life planning:

Life planning (or life coaching as it may be called), in a similar vein is all about minimizing (or eliminating) regrets. Not just financial regrets, but in the broader sense of life (careers, relationships, health, community). Although you never know in advance how a decision will turn out, people rarely have regrets when they spend their time and resources in ways consistent with their values and priorities. Ask yourself this question: If you knew you only had 5 good years left to live, how would you change your life?

It is common to postpone the things we want to do. The question is: How can you do more of what you want now instead of waiting?

Email me if I can help you clarify your priorities and accelerate some of your life goals. Have a great week.