A Step-by-Step Guide to Overcoming Analysis Paralysis

Part One of the New Year, Fresh Perspectives: A Four-Part Money Mindset Makeover series! Author, finance podcaster, and all-round good sort Kate Campbell guides us in revamping our approach to finances in the new year to gain fresh insights, make smarter money decisions, and achieve financial stability and success in the year ahead.

​​​​​​You’re scrolling through Netflix, trying to figure out what show to watch. You’ve got some good recommendations to try, you can see what other viewers are enjoying and you can even watch some trailers, but an hour can disappear while you’re trying to decide what to watch.

This is analysis paralysis.

While it’s annoying when you’re trying to have a movie night, analysis paralysis can be harmful to your wealth-building journey.

We have so many options these days, from bank accounts to investment opportunities, it can feel impossible to make a fully informed decision — even if we’ve read all the reviews, compared the fees, and analyzed the advantages and disadvantages.

More options don’t make us happier

In fact, psychologist Barry Schwartz argues that a “greater variety of choices actually makes us feel worse”. Then, if we do make a decision, we worry about whether we made the right choice. Schwartz calls these “decision ghosts”. So given all the choices we have now, the natural desire to make the ‘right’ decision, and the resulting drive to research, research, research, how do we combat analysis paralysis?

Analysis paralysis is a decision-making problem at its core, so let’s tackle it that way. Choosing a brokerage account, which you’ll need to buy shares and ETFs, is a common challenge that people in my community experience analysis paralysis with. 

Negotiate analysis paralysis with this specific challenge

  • First, you need to identify the problem you’re trying to solve and figure out where you’re stuck. Start by writing down all the pieces of information you feel you need to know before you make a decision. Without doing this, you can get trapped in an endless research quest where you never feel ready to make a choice.
  • Then use this list to do your research and write down what you discover. This information will form the foundational knowledge you need to make a decision further on in the process.
  • Use this knowledge to generate options. Try to narrow down the choices of brokerage accounts to three suitable options that would fit your personal requirements. Any more than that will start to get overwhelming and reduce the chance that you’ll make a decision.
  • Now it’s time to experiment. Give yourself a set time period to open an account with each of your top three options and try them out. Make notes on what works and what doesn’t, and assess how well each option meets your needs. Importantly, set yourself a due date to make a decision at the end of that trial period and move forward with your chosen brokerage account (remember, this decision is not set in stone). Even better, find a friend to hold you accountable for this decision-making process.
  • It’s time to make a decision. Using all the information you’ve gathered and the experience you’ve had testing out each brokerage app, make a decision that is the closest fit to solving your problem. You don’t need a perfect solution, but you do need to make a choice here.

Remember, not making a decision is still a decision. If you’re struggling with analysis paralysis, it’s also good to remind yourself that perfect doesn’t exist in finance. Our lives are full of change, and searching for perfection can stop us from taking action. So, throw the word ‘perfect’ away and instead learn just enough to take your first small step.

Take action 

My challenge to you is to find one tiny action you can take today on a task you’ve been stuck in analysis paralysis mode with for a while.

Kate Campbell is the host of the Australian Finance Podcast and the author of Buying Happiness: Learn to invest your time and money better, available online through Amazon and Booktopia.

Related articles

Getting to Know the ‘E’ in ESG Investing
As climate change intensifies, many investors are wondering how to adapt our everyday actions and decisions to build a more sustainable future. Kate Campbell from Rask Finance gives us an overview of ethical and ESG investing, and explores the impact that investors can have on the environment, by investing more mindfully.
How to Avoid the Investing FOMO Trap
A 2021 study by the Financial Markets Authority of New Zealand revealed that 31% of DIY investors who invest online plunged into an investment just because they didn’t want to miss out. The FOMO is real! Emma from The Broke Generation explores why the fear of missing out drives some to take on risky investments, and how to avoid giving into the FOMO.
Are Online Investing Platforms Good For Beginners?
These days you can work and unwind online in an abundance of ways, and investing is no different. Online investing platforms have exploded in popularity over the past few years, offering easy and accessible entry to the stock market. But are they suitable for beginner investors? Ruth explores the world of online investing platforms, and how you can use them to start your investing journey.