If $1,000 fell into your lap tomorrow, how would you spend it? Would you tackle a home decorating project, upgrade your wardrobe, fix that nagging car maintenance issue, take a vacation, sign your kids up for summer camp, or put it in your savings account for a rainy day? If you’re like me, there are always a gazillion things I want – some are practical, some make no financial sense at all.
The fact remains that it’s much easier to spend money on something fun than to use it to boost your financial future. With that in mind, here is a framework for decision-making that could help you make the best – and the right -decision for you if this $1,000 magically showed up in your checking account:
1. Write down your top 3 core personal goals – Typically, where you spend your money demonstrates what’s important to you. The decisions you make are an outward expression of who you are. For me, my goals are to educate and raise my kids to be fruitful adults, spend as much time with people I love, and help other people find the key to joy in and throughout their lives. Now I must ask myself, “Valerie, will my spending decision support one of these three goals?” If the answer is yes, I can move on to step two. If the answer is no, I should consider spending the money on something that will.
2. Narrow down your choices – There are a few questions you can ask that may help weed out the bad decisions, such as:
• Will this purchase grow in value over time?
• Will it generate positive cash flow (make me money) or negative cash flow (cost me more money)?
• Will I make memories that I’ll never forget?
• Will it benefit someone other than me?
• Will this inhibit my future financial security?
You may not like the answers to some of these questions but at least you’ll know whether the decision could be a benefit – or a liability – to your life.
3. Consider the facts – The best decisions you can make are informed decisions. Start by researching your options so that you can make the most of your money. Talk to trusted friends or family members to learn from their experiences. Evaluate different buying possibilities so that you are confident that you’ve really thought through your choices.
4. Learn from yourself – 30 days after you make your decision, ask yourself what you could have done differently so you can use that information in the future. Consider which factors weighed most heavily in your final decision. What was the outcome? Given the choice, would you do it again,? Were there other aspects you should have considered? Are you paying the price now because you didn’t make the right decision?
If you need an accountability partner for your major financial decisions, give me a call. I’d be happy to help you find the confidence you need to make the right decisions for you. I’d also like to hear your ideas that could be added to this list – please comment below!