ABC Principle™ Key To Effective Decision Making


ABC Principle™: Unplug the fan
ABC Principle™ – Unplug the fan

The ABC Principle™ is an equation A+B=C, pointing out links between a person’s attitude (A) and behavior (B) and resulting consequences (C). The wider appeal stresses managing specific inputs (A & B) to give reliable outcomes (C). Yet, our practices do not align with this principle. So, it’s crucial we figure out our attitudes (beliefs, worldview) before solving issues, otherwise, we might regret consequences of our choices (A & B).

ABC Principle™ – C is the Score

I coined the ABC Principle™ over 20 years ago when someone I will call Fred asked my opinion about consolidating his debts. He had seven credit cards and, like an orchestra conductor, used them creatively to keep each one active and maintain his credit score. His financial advisor assured him that merging balances into one loan would resolve his plight.

Why would this help reduce your stress and lower your debt, Fred?

I won’t have to deal with all these credit cards any longer was his reply.

Is this the only change you’re planning, Fred?

Debt Burden
Debt Burden

After lengthy discussions, Fred realized the problem did not lie in easy credit or enticing sales gimmicks, but in his belief that this act would improve his credit rating and credit score, which it wouldn’t. I pointed out to Fred that the credit score was C in the ABC Principle™, merely showing he is in debt and making regular payments. It didn’t mean he was in control of lifestyle choices that avoided debt. Fred’s “aha!” moment came when he understood the credit score, C, was like a hockey score.

After the hockey game, the coach and players don’t manage the score (5-3 or 2-0). Instead, they watch films of the game to learn what happened (A & B) so they can change for the next game. Likewise, individuals should know their attitudes (A) about money and how it influences their behavior (B). My Mom handled finances in our home when I was growing up. She saved to buy stuff and watching her behavior taught me to hate debt, save to buy items, and pay my credit card balance in full monthly.

ABC Principle™ – A and B are Me

The ABC Principle™ applies whenever we must decide on an issue. Start by finding out the desired outcome and relevant controllable variables. I tell my students never worry about their grades, because they are C, which they can influence only by their attitudes (what they believe about studying, college…) and their behaviors (how they apply themselves in class, how they study, recharge…). Worrying about the grade, the outcome, won’t change it; the student is the variable who can cause change.

Applying the ABC Principle™ to personal finances will yield significant benefits for individuals. Canadians have the highest household debt ratio in G7 countries. Consumer debt in Canada was $2.4 trillion in the second quarter of 2023. The major challenge is our spending decisions focus on C, merchants’ bombardment of expensive “free” offers, and other enticements that take our eyes off us (A and B). Bank of Canada has not helped our cause. They erred by keeping interest rates low for too long, which exacerbated our debt challenges. Then they hiked interest rates burdening many folks; hopefully, they will lower interest rates now to ease the pressure. Meanwhile, let us remember our ABCs before every spending decision.

ABC Principle™ in Business

The Numbers Are C - Manage A & B
The Numbers Are C – Manage A & B

The ABC Principle™ is vital for firms, profit and nonprofit. As a former Chief Financial Officer (CFO), my view of the finance function remains: Use the ABC Principle™ to fixate on inputs, tasks and events (A & B), and away from financials (C). As well, provide simple, accurate management and fiscal reports, the score, (C), while ensuring compliance with laws and regulations. During the iterative budgeting process, identify and rank projects and activities (A & B). Financial data show the budget’s costs (C), which, if excessive, we deal with by raising funds or cutting projects and events, never cutting costs. That’s futile; it doesn’t address cost drivers (inputs).

ABC Principle™ in Society

Is it possible by focusing less on C and more on A & B, society may deal more effectively with our challenges? Take health care in Canada. Successive governments brag about how much money they spend on health care, but none look at the how they spend those funds. Heavy bureaucracy exists in hospitals and elsewhere and needs reviewing. Homelessness is another example. It’s vital everyone has a home. That should be a top priority, but homelessness is C in the ABC Principle™. In the short term, we must construct additional facilities; however, the primary focus should be on identifying and resolving long-term causes.

Tips to Start The New Year in Control

Focus on A & B
Focus on A & B

The ABC Principle™ will help us focus on what’s controllable in every situation and move away from wasting time, effort and money trying to manage outcomes, the hockey score. Let’s pledge this holiday season to adopt this principle and not allow merchants to lead us into debt. These tips might help stay the course:

  1. Benchmark your financial savvy with this check up

  2. Before spending, check this Affordability Index

  3. Do not go shopping without a list. When you want to shop, list articles and prices and stick to the list. Make a separate trip for anything not on the list. The delay might change your mind.

  4. Merchants are after your funds: Boxing Day sales lead seamlessly into Valentine and Easter baits; play offense: 

    1. Minimize online shopping, it’s easy to spend. Ensure you must move from your computer to get payment details.

    2. If you see a sale that entices you, wait 24 hours, use the affordability index to help decide if you must buy it

    3. Think deeply before accepting extended warranties, which usually waste your money.

    4. Enticing messages will bombard you to “spend to save.” That’s nonsense. You never save when you spend; you spend less than the advertised price, but you save nothing. Don’t believe me? Where are the savings from previous deals?

  5. In January, go on a spending fast to help you learn your spending habits, not to change how you spend. Decide your plans for change after learning.

© 2023, Michel A. Bell


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Michel A. Bell

Michel A. Bell is a former senior business executive, author of seven books — including his first children's book published in 2022 — speaker, and adjunct professor of business administration at Briercrest College and Seminary. Michel is a Fellow of the Chartered Certified Accountants (UK), holds a Masters of Science in management degree from Massachusetts Institute of Technology and a Doctor of Business Administration honoris causa from Briercrest College and Seminary. He is founder and president of Managing God's Money™ and Stewarding God's Resources.

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