By Lea Schodel
How do you know whether to say YES, NO, or not NOT NOW to a decision?
When it comes to moving forward with your life, your ability to make confident, timely financial decisions is key. But it’s also far from easy!
Important decisions can create uncertainty and confusion – especially when there’s a strong argument for and against! Fortunately, there is a way to feel really good about any decision you make. So whether you’re deciding if you should:
Or anything else that involves a financial investment, this article is for you.
A lot of people base money decisions on what their heart or their head says. In other words, they rely purely on logic, or purely on emotion. They may even decide based on the price tag alone. These are all important considerations, but they only give you part of the story.
If you want to choose right and choose well, there are eight decision-making factors to consider. So keep reading and I’ll tell you what they are and why they matter to your wealth and your life.
Let’s tackle the easiest question first!
Do you have the funds or the income to support what you want to do?
If so, where will the money come from? [For example, will you cash in an investment, dip into your savings, use your Get Out of Jail Account, or take out a loan?]
One more thing…
Just because you can afford it doesn’t mean you should do it! Similarly, just because the numbers say you can’t afford it, doesn’t mean you should discount the idea altogether. Instead, resist the temptation to make a numbers-only decision and move onto factor 2.
You may be able to afford the cost, but is now the right time to go ahead? When considering timing, take account of what your heart and head are saying. For example:
When you think of the choice in front of you, why are you excited by it? What do you believe this purchase will bring or add to you and your life?
For example, a campervan may represent the freedom to head out on more adventures. A cleaner may give you back time to spend with your partner. A nicer apartment may make you feel more successful and fulfilled.
As you can see, every purchase has feelings attached.
The short-cut to Financial Happiness is to ensure financial decisions align with your values. If they do, you’ll likely feel good about your decision long-term. If they don’t, you could end up disappointed or regretful.
[Discover how to define your values here.]
We rarely make decisions in a bubble. Instead, our choices are influenced by what we believe other people will say or think about us. The key is to become aware of what these influences are.
This question can be triggering, but it’s worth going there. When you can separate your needs and the needs of others, it’s easier to pindown the right way forward.
You may have the funds, but is this specific option the best way to spend your money? What would you do if you prioritised something else?
Remember, saying yes to one thing means saying no to something else. This isn’t a problem if you’ve chosen well, which is why it’s vital to consider the opportunity cost of any decision. For example:
Remember, opportunity cost can be long-term and short-term. What’s more, it can work the other way too. For example:
When we consider the opportunity cost, we gain a better perspective as we have the opportunity to zoom out and see the potential impact of our decision on all areas of our life.
A financial decision doesn’t affect your money situation alone. Often, your choice affects your time, energy and attention too. When considering your choice, be sure to think about the potential impact on these three valuable resources.
Will your time, energy, and attention go up or down?
On a similar note, your decision will likely impact other people too. For example, if you invest in a cleaner, will you have more energy and time to spend with your partner?
Consider the broader impact of your decision on other areas of your life. And remember to have the conversations with those that will be affected. It may feel hard, but if you share your thoughts and feelings and come to a consensus, this can give you a lot more confidence.
What do you hope to achieve as a result of this investment? How do you imagine your life will improve? When considering this question, it’s worth getting clear on whether or not the potential purchase is a want or a need.
For example, a broken dishwasher may be a need, whereas a new dress for a wedding could be a want.
When you understand your intention behind your choice, you’re empowered to get clear on the best way to achieve your desired outcome. It makes deciding a whole lot easier.
Is there another way you can achieve your intention from the purchase you’re considering? For example:
Remember, you’re chasing feelings – not things. There are countless ways to experience your values. Freedom could be quitting your job and travelling for six months, but it could equally be mystery tours every weekend.
You can experience your values on a spectrum that can cost anywhere from $0 to $000,000s! The trick is to figure out what you’re willing to spend to feel financially happy and to move forward financially.
It will take longer to consider all these factors, but the extra time is more than worth it. If you get under the skin of your thinking, you’re less likely to get burned by a bad choice, or disappointed that you missed an opportunity.
Remember, wealth is about more than numbers alone. It’s about cultivating the right money mindset combined with wealth-creation strategies so you best decide where to put your money so you can live the life you want.
Disclaimer: All information contained within this article is of a general nature. Do not rely upon it when making financial decisions. Please consult a professional financial advisor or planner (like us!) before acting.