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Funderburk Financial

Methods for Improving Financial Decision Making - The 4Rs

by Billy Funderburk, CFP®,  MBA

Behavioral financial advice has numerous tools to aid you in making quality financial decisions. One such tool is the 4Rs. The 4Rs will help you to slow down a potentially emotional decision window and help you to calmly reach a better decision than you might have otherwise.

The 4Rs are Recognize, Reflect, Reframe and Respond. Now let me attempt to paint a brief picture of each “R” or step in the process.

The first R is Recognize. In this step, you will attempt to recognize what you’re thinking about, how you are feeling, and what’s happening to you physiologically. Are you in the best emotional state to make the decision that you are contemplating?

The second R is Reflect. Now that you have recognized your emotional state, you need to take the time to reflect on it to understand how it may affect your ability to make a quality decision. Reflect on the big picture, on the long-term and how your values should reflect in this decision.

The third R is Reframe. During this phase you will want to take step two a bit farther and attempt to access if you are looking at this decision from all angles. Is there a different way to look at this decision? Does your decision align with what you really care about?

The fourth R is Respond. Ultimately, you do need to make the decision. This step is about accessing whether or not you have correctly applied steps 1 – 3, and then making the decision.

The 4Rs, when practiced over time, can help you to calm yourself and reach the proper emotional state for effective decision making. Though this tool can be practiced by anyone,  it is easier to make these assessments with the help of an objective observer. Therefore, I suggest soliciting the help of a Behavioral Financial Advisor™ who has the necessary training and experience to guide you through the process.

Note: Concepts derived from the course, "Behavioral Financial Advice and Your Clients" by Think2Perform Inc.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.