How to Make Better Financial Decisions

Making poor financial decisions is something we’ve all done at some point or other. But that doesn’t mean you can’t learn and improve when it comes to how you manage your money. There’s no right or wrong when it comes to making these kinds of decisions though; but there are steps you can take to improve your general approach to financial decision-making.

That’s exactly what we’re going to talk about today. The right approach to financial decision-making will mean taking fewer unnecessary risks and making more informed decisions too. But there’s much more to it than that, and we’re going to cover it all in this guide.

So read on now and learn about what it takes to make better financial decisions going forward. And then implement the ideas you feel are most applicable to you.

Never Make Decisions Quickly

When you’re making any kind of financial decision, it’s not something that you can afford to rush. Quick decisions are not often the right decisions, and if they turn out to be the right decisions, it’s through luck. So always slow things down when you need to make a decision regarding your finances or spending money on something, and take the time to really think it over. You don’t always need to make snap decisions on the spot because what seems like the right call one moment, might seem completely wrong the next day.

Write Down the Potential Outcomes of Your Decisions Before You Make Them

One way to weigh up your decisions regarding your finances is to write down the potential outcomes. Of course, you can’t predict the future, but you often can get a pretty good idea of a best and worst case scenario that might be likely to play out when you make a particular financial decision. By writing these potential outcomes down and seeing them in front of you, it should give you some more clarity on what’s the right move to make and what’s not. Having it there in front of you in black and white often aids the decision-making process.

Be Skeptical of Sales Talk

Being a little more skeptical about sales professionals and the lines they deliver is often a good idea. You might not think of yourself as the kind of person who’s easily seduced by sales patter, but that doesn’t mean you can’t be persuaded and taken in by a talented sales person. These people are generally very good at what they do and they know how to frame a purchase in a way that seems appealing to you. That’s their job, but it’s up to you to spot the misleading sales talk and get down to the things that really matter.

Be Sure to Talk it Through

For many people, making financial decisions is not something that should be done alone. Speaking about it with your partner is obviously important if you’re in a long-term relationship and have shared financial interests. Taking big decisions without the input of the other person can be taken as a breach of trust and it’s not something you should do. But even if you don’t have a partner, talking over these big financial decisions with family and friends can help a lot. You might see things differently when you hear other perspectives.

Adopt a Long-Term Mindset

Whenever you’re making decisions regarding your finances, you need to make sure that you’re considering the long-term implications. A long-term mindset will make a big difference to the decisions you make because you won’t just be thinking about the immediate financial impact of your decisions but also what it might mean for you in the months and years ahead of you. Force yourself to look at your decisions from this point of view before you rush into anything you might end up regretting later.

Use Data to Inform Your Decisions

In many cases, you’ll find that you can make better and, most importantly, better informed decisions when you look at the data. Of course, this all depends on the kind of decision you need to make. But if there’s data available on potential outcomes and what might happen as a result of that decision, you should definitely make the most of the opportunity to assess that data and really delve into it. Or, if you don’t really know how to do that, get the help of someone more data-savvy who can assist you.

Think Twice When Committing to Recurring Spending

Recurring spending is on the rise. You probably have at least one subscription service that you’re signed up to. Most of us pay for Netflix or Amazon Prime or something similar. But if you start stacking too many of these subscriptions and recurring payments, it can all become a little too much. That’s why you should really take extra care when it comes to deciding whether or not to sign up to a new subscription or tie yourself to a new form of recurring spending. It’s not always a wise move to make, even if the monthly payment seems relatively low.

Compare Prices Before Coming to a Decision

Before making any purchasing decision, you should take the time to compare prices being offered by various sources. Lots of retailers will sell the same things at vastly different price points and that’s something you should take into account when making a decision. So even if you decide that you do want to buy something after taking the time to really think it through, that doesn’t mean you should jump head-first into the purchase right away. Instead, take the time to compare the different options with the help of comparison sites.

Take Even More Time to Consider Purchases When Using Credit

If you’re thinking about making a purchase that involves relying on credit of some sort, be it a credit card or a loan, you should always take even more time to decide whether that’s something that you really want to make happen. You’ll be paying interest on that debt until the full amount has paid off, and that can really damage you financially if it’s a big purchase or you’re simply not able to pay it off quickly enough. Always take extra time and be more conservative when it comes to buying using credit.

Understand How Loans Work Before You Take Them Out

Before you go ahead and take out any loans, you should know exactly how they work in terms of the fees and repayment requirements. You don’t want to load up on debt before you even stop to understand how it all works. There are lots of great resources out there that’ll help you learn more about loans and debt. For example, you can learn how installment loans work from Wise Loan before you take one out. Stopping to understand and learn before taking action is always the best idea.

Don’t Make Decisions Out of Greed or FOMO

You should never make decisions to spend your money based on greed or on a fear of missing out on something, which is known as FOMO. This is something that’s particularly common in the world of investing. People see that a stock or something similar is rising in price, and they all jump on board, even though the rise has already happened. That FOMO usually then results in them losing money rather than making it as they had originally hoped. That’s why you should always be careful and try to remain level-headed when it comes to spending decisions.

Set Your Financial Priorities

Knowing your financial priorities and being as clear as you can regarding them will help you a lot as you strive to improve your financial decision-making. You don’t want to put yourself in a situation where your priorities are compromised by bad decision-making, so always try to make decisions in line with your financial goals. If your priority is eliminating debt, for example, making purchases using credit is probably not something that you want to do because that’ll end up completely ruining your chances of meeting your goal.

Take Responsibility for Your Decisions

Finally, you need to make sure that you own each and every decision you make. You need to accept that you’re the master of your own destiny when it comes to your finances and acting like your money is not your responsibility is something that’s never likely to end well for you. If you’re busy blaming other people, you’ll miss the important fact that improving your financial situation is something that’s in your hands. And only you can take the steps that need to be taken to start improving the situation and making better decisions.

Making the right financial decisions isn’t always easy, and you’re not going to get it right every time. Be sure to make the most of the tips and advice outlined above if you want to make sure you make better financial decisions moving forward. A few steps in the right direction can go a really long way.