OODA Loop Your Financial Plan

Applying military tactics and training to life, business, and your financial planning provides valuable insight and advantages. Battlefield tested, these tactics were developed under stressful and extreme environments. This formula is often ideal for less life threatening decision making. I appreciate the simplicity, and the forward thinking of these approaches. One military paradigm I employ, both in life and with clients, to speed up the decision making process is known as the “OODA Loop”. Legendary Air Force pilot John Boyd developed this analytical decision making process while flying in the Korean war. Observing that slow decision making was costing American pilot lives, he conceived a process to make efficient and timely decisions.

The elements of the “OODA Loop” are: 1) Observe, 2) Orient, 3) Decide, and 4) Act.

My clients often fail to make timely decisions, or any decision. Many become overwhelmed by numerous options and information or are scared of an unknown outcome or a variable they have not considered. For a successful financial outcome we must act timely to effectively move our process forward and achieve our financial victory. I employ the OODA loop with clients (sometimes covertly), when encouraging them to make a decision and act, moving us towards a particular goal or success. If you are having trouble making an important financial decision, consider adopting the following four phase strategy.


Simply stated, this means take in all the relevant inputs around you. The more inputs you gather, the more information you will have when you eventually take action.

Keep in mind, observation is not static. Just as the third law of combat, Prioritize and Execute commands (Prioritize,Execute & Your Financial Plan), while observing, we must adapt to changing circumstances.

Observations in the financial planning realm may include: 1) market returns in an asset class or sector, 2) measuring volatility, 3) housing price indexes, 4) market trends, 5) observing and recording your spending habits. The relevant data you should observe depends on your particular financial planning decision or roadblock. For example, if you are planning to purchase a home in San Diego County, historical home values in the county is vital data to observe but historical home values in Houston, Texas is irrelevant.


While you are observing the inputs, you must place the information into context.

Boyd considered this phase of the loop to be the most critical, since it is so closely tied to training and experience. Past experiences give you the ability to analyze and synthesize the critical data and disregard unnecessary information. As you become more experienced with your financial life, you will become faster in determining what is useful information from your observations.

Orienting financial information can be challenging. Ask yourself questions like:

  1. Given my income, what does my monthly spending mean?
  2. What does this index return mean in relation to my investment holdings?
  3. What does my company stock value mean in relation to the total equity market or the S&P 500?

Whatever observations you are making regarding a particular financial decision, you need to align that data with what you already know and understand to provide useful context. For example, you may know what your monthly budget is but without knowing your household monthly income, the budget number is useless in determining your monthly cash flow.


Observing and orienting enables us to make a well informed decision.

Our time line determines the type of decision we are making. Is our decision:

A Strategic Decision- with a long range time line.

These are decisions about your long term objectives and it is important you take the requisite time to deliberate on strategic decisions. With clients, I often see this type of long term decision making when determining if and when to exercise stock options.

Typically, stock options do not expire for ten years from when they are vested. Upon granting, we can start observing data such as: 1) what is the value of the stock price today?, 2) What is the strike price I can exercise these options at?, 3) Can I use a cashless exercise?

We can orient this data by asking: 1) How much has the stock price grown annually each year?, 2) How sensitive to market forces is the stock price?, 3)Do I have enough liquidity to buy and hold the stock? Over the ten year period, you can observe and orient these questions deciding if you will exercise your options and if so, whether you will exercise a cashless transaction or buy and hold the stock.

A Tactical Decision- with a near term time line.

These are time sensitive financial decisions and require action quickly.

Deciding to move forward and offer to purchase the investment property you viewed recently is a tactical decision. You have likely observed the data on the transaction such as the monthly income and expenses anticipated on the property.

You can orient the income and expense information by asking: 1)Are there a lot of large repairs or maintenance not factored into the monthly expenses?, 2) What are similar rentals in the area renting for?, And most importantly, 3)What is my monthly cash flow on this investment? Once you know the cash flow, among other investment specifics, you can decide if the purchase makes financial sense and if you should put in an offer.

Another common tactical decision with a short time line happens when receiving a new job offer. Oftentimes there are only a few days given to accept or decline an offer. In these cases, you will observe data such as salary, benefits, and flexibility. You will then orient the data in relation to your current employment; comparing which is the most beneficial employer. Once you observe and orient you can make an informed decision and act by letting the new company know if you will accept the offer.

Note, even when we observe and orient thoroughly, there will be decisions we must make without critical information. No matter how little information you have, at some point you must make a decision. Working with a financial planner can provide clarity and guidance when lacking critical information.


In this final step, your process culminates in taking action, and in business and life, only action matters.

Taking action is the most challenging stage of the loop and often the source of failure in any decision making environment. Once we take action we must take complete ownership of our decision and its inevitable outcome.

When your financial plan requires a decision or meets a challenge that must be addressed, utilize the OODA Loop. This analytical tool provides a method to intake and assess information, decide on a plan of action, and act, moving you forward towards your goal or solution.

Author: Jenny ErdmannJenny is owner of Chisholm Financial Planning & Investments. She loves discipline, freedom, America, and financial planning. When not working with clients, she can be found enjoying sunshine and freedom with Lucy, the best dog in the world and Chisholm's mascot.

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