Reading my last two columns, you may have felt an emotional response. If you aspire to a big house, or send your kids to private school, then you likely stopped reading. Why?

Ideas that conflict with the default decision create pain. Our brains don’t like pain so switch off.

For high value topics, both financially and emotionally, it is worth training the ability to stay engaged and work through the answers. Adding together the last two columns, most of us are looking at $3 to $8 MILLION worth of expenditure. That’s simply two topics – smart decision making is worth serious cash for you, and your employer.

The last sentence is an example of how I stay engaged — make the question “bigger” that the local issue that’s causing you pain. I have to stay engaged with housing and education because my larger issue is an ethical life with meaning (that’s free from unnecessary financial stress).

Making the issue bigger is called “broad framing” and it’s an effective tool for pain management. In addition to framing, I ask:

• Where is the pain?
• Is it a gain, or a loss?
• Is it small, or large?

Kahneman’s book contains a risk matrix that lays out situations where we will seek/avoid risk. What most interested me is that we can frame choices so our “irrationality” works in our self-interest. Kahneman has excellent examples (litigation, negotiation, organ donation) that you may have heard over the years.

Two weeks ago: I asked if the big house is worth $7,400 every single month?

• I made the financial costs visible
• I made the financial payments frequent
• I wrote the article while living alone in a small two-bedroom condo

I made owning my “big house” more painful. Then I asked myself, am I feeling a million dollars worth of pain? Hell no, I replied!

One week ago: I asked if private education is the best way to invest in my children?

• I framed the question as broadly as possible
• I made the goal to maximize the overall benefit to my family
• I used a reference group of other people’s children

This removed feelings of pain. The default option had me thinking that spending on education equals love. That’s an emotional error. The true choice is directing family investment to maximize benefits for everyone. Broad framing is an effective counterbalance when people seek to link spending with love. 

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Let’s consider two more areas where framing might be useful: nutritional supplements and helping family members.

Nutritional supplements remind me of lottery tickets. We accept that they are largely a waste of money but there is a remote payoff of everlasting life.

As a public service announcement, a friend of mine pointed out that we might be increasing our risk of death through unnecessary supplementation. My buddy is a nephrologist, Vice-Chair at the Mayo Clinic and an assistant professor of medicine.

Does that reframing change how I feel when I watch my daughter eat multi-vitamins? You betcha!

Investments of time are often more costly than investments of money. Munger’s Psychology of Human Misjudgment (and many other sources, including Kahneman) point out a few things about how we see our role in the world:

• We overestimate our ability to influence events
• We overvalue the recent, the present and the status quo
• When we think about risk, we overestimate the risk of highly-salient negative events (terrorism, plane crashes, homicide).

Combine all of the above and we are prone to large errors when it comes to people that are close to us (peers, friends, family, kids). That’s hardly news, until you consider the top two emotional drains in your life.

Do it now – what are the top two emotional drains in your life? Do you have key relationships that are more about negotiation, than love?

Unless a supplement-eating friend dies of cancer, the vitamin discussion is unlikely to have a visible impact in your life. There’s a financial cost from buying unnecessary goods but most of us would spend our vitamin money elsewhere, rather than save it.

However, the emotional drain from continuing to pour love and money into the worst performers in our life is worth considering. To help myself here, I set my goals looking to the future:

• Break the chain – pain that comes to me, stops with me
• Forgive – by acknowledging that people who bring the pain, received it from someone else
• Acknowledge – that my ability to impact the world is limited, and mainly achieved via how I improve myself

If that seems a bit soft then consider a risk-policy to never fund a losing situation. In the acquisitions business there is a simple mantra, never fund operating losses. In the markets the mantra is only losers average down.

In human terms, it could mean that I help pay for education, addiction treatment, health care… but we each need to take care of our basic living costs. If someone can’t help themselves then I’ll take the pain (of watching them fail) to create the motivation for a change that will result in future benefits.

The re-framing is a change from “prevent pain” to “create the conditions for positive change.”

These are difficult decisions to make with close friends and family. However, the expected payoff (time, money, emotion, love) is far greater.

Bottom Line: Break the chain and frame wisely.