All Financial Decisions Have Side Effects — Are You Ready for Them?

This year, Novo Nordisk and Eli Lily stocks have done far better than the market as consumers discovered that their diabetes drugs help weight loss by curbing appetites.

We can't know the drugs' long-term side effects, but we know that another part of the stock market has been hit by side effects. Some of the food companies shed value as quickly as those "dieters" shed pounds. It turns out not wanting to eat is not good business for businesses wanting you to eat.

It is still too early to digest the impact of these drugs, but not too early to understand the side effects from other choices we make. We may focus on one thing we want while ignoring other things that this decision affects.

Let's say you want to buy a home because you don't want to throw money away renting. While owning a home can be a good financial and emotional decision, most people underestimate the side effects. For example, you may have a deeper sense of community through ownership. The house may appreciate. You feel like you have more stability.

At the same time, renters don't have to budget for maintenance. They don't need to dedicate time for the regular chores necessary to keep up the home. Their costs are lower if they realize they don't like where they live and want to move.

By understanding the side effects, you can make a more informed decision.

Same with a decision to change jobs so you can make more money. You may gain or lose flexibility, depending on your work's policy. You will enter a new culture. While your initial pay is higher, you may have more or less opportunity for advancement. There are obviously other things attached to your job decision than the money.

The same goes with retirement. Some side effects are exciting: You have more time to pursue things that are important. You get to spend time with the grandkids. You and your partner can do the things that you had put off.

But most of our clients who retire realize it is not exactly what they envisioned. Early retirement means your working friends are not around for you. You and your partner have built lives around the other's work schedule. And you may not have thought through how much more time you will have and what to do with it.

Then there is that money thing. If you were a good saver until retirement, you have to shift to become a good spender. Those often are not mutually compatible. Retirement, like all transitions, creates disequilibrium until you adjust.

And decisions come with spending, including sharing your success with your family. You can decide to bring your adult children and family with you on trips. You can help them out with a home purchase. You can leave them money in your will.

While the big family trips are fun, they can also include some tension. And though you want your children to benefit from your estate, you also want to put up guardrails to prevent a bad marriage or a bad business that could cause them to lose that money. Or you may feel your kids are not appreciative of all you have done for them.

All family decisions have side effects; explore them rather than resent them.

Financial choices are complicated. Don't let the absence of perfect information make you lose your appetite for big decisions, but spend time up-front understanding their potential side effects.

Related: What Is the Real Purpose of Money?