A lot of the financial consequences in our lives come from our decisions, but those decisions are dictated by the set of possibilities we think exist. Often, we think we have fewer options than we actually have.
Thinking you have fewer choices than you actually have is very common. Often, when I hear people talk about financial decisions, they speak of decisions between two options. This is called a *false dichotomy*. It’s called a false dichotomy because there may be more than two options. An example of a false dichotomy is the decision between paying an electricity bill or taking out a payday loan. What are some other options? Let’s brainstorm.
- Pick up some extra work to make a few more bucks
- Sell some of your stuff on Craigslist
- Partially pay the bill
- Put the bill on a credit card
- See if your utility company has emergency assistance
- Get help from your church/congregation
- Ask for help from a community action agency
- Contact a non-profit for help
- Ask friends or family for help
- Sell blood plasma
Wow. There are ten more options that I just came up with in about three minutes. Some are better than others, but now we have a few to choose from. It’s certainly a lot better than getting fixated on two bad options.
Sometimes, I hear people say they were forced into a bad decision. I wonder, how many options did they think they had available? If I hadn’t brainstormed for a few minutes to come up with some options for our false dichotomy, what would’ve happened? We would’ve thought about the consequences of two bad choices. Fail to pay the bill, and lose electricity (horrible); or pay the bill with a payday loan, and put yourself in a cycle of debt (very bad). The most immediately useful choice is the payday loan.
Later, to hear the person tell it, they were limited a set of bad choices, and they took the best way out that they could find. They’re the victims of circumstance. Except, they could have widened their choice set-their list of ideas to fix their problem. The likelihood of a more desirable outcome could have increased, because they weren’t misled by a limited choice set.