Making Good Financial Decisions
It is almost certain that most Americans are feeling the effects of the current economy. While conditions have improved somewhat over the past five years, there is still high unemployment along with rising consumer prices for food and gasoline. For people who are employed job security is fragile at best and many individuals continue to struggle with lower wages, vanishing savings, and even foreclosures.
Making good financial decisions is one of the cornerstones of financial success. There are steps you can take to increase your chances of making the smart choice when it comes to your finances. Most are easy to understand but like most things, actually following through with them is a different matter altogether.
When you are dealing with financial stress it can be extremely paralyzing. You either ignore your money problems and do nothing or worse, you make poor and reckless decisions which put you even deeper in debt. All financial decisions you make have consequences. Some obviously are more serious than others. Using your credit card to go out for dinner may not be the smartest thing to do if you have a lot of credit card debt. But deciding to buy a new, sporty car when you can't afford it will cause a lot more financial damage in the long run.
The following suggestions may help you avoid making a rash and potentially devastating financial decision. Remember that your long-term goals of financial security and being debt-free depend on how well you manage your money and control your spending. Don't jeopardize your financial future and well-being by making a poor decision which you may regret. Hasty decisions involving money rarely turn out well.
Steps Toward Making Good Decisions About Money
- Decide what is really important. This involves having an honest conversation with yourself about what you really want out of life. It may be spending time with your spouse or children or maintaining your good health. Determine your personal values and make financial decisions which are in keeping with them.
- Control your spending. Financial security is almost impossible to achieve without an active effort to control spending. Examine your budget and look for ways to cut expenses. Before making a purchase ask yourself "Do I really need this?" When times are good it's easy to overspend and not think about your shopping habits. But the smart financial choice is to live within your means and save as much as possible. Economic conditions can change quickly and you need to be prepared.
- Be cautious. Everyone has responsibilities and obligations- it's part of being an adult. Owning up to your personal responsibilities and obligations can have a positive impact on your decision making process. When you understand that the decision you make can have long-lasting consequences (either positive or negative) it can help point you in the right direction. Be deliberate with all financial matters.
- Lose the emotion. Money and emotions are hard to separate. Impulsive, emotional buying has led many a person down the road to financial ruin. To make good financial decisions you need to have a clear head and think logically. Receiving a raise or an unexpected bonus is not a license to go out and shop. Be grateful for the surprising extra cash and then deposit it into your savings account.
- Create a positive structure for making decisions. This means using money-management tools that work for you. If you have a problem with impulse buying, stay away from the mall or internet websites. Consider living on a "cash only" basis especially for everyday items. Allow yourself a reasonable amount of spending cash for the week. When it's gone, it's gone. (Don't cheat) Employ the 72-hour rule when shopping. Give yourself 3 days to consider a purchase and then decide if you still want the item. For most people, the initial thrill is gone at this point.
It takes determination and patience to successfully manage your finances. Always take time to consider the consequences when making the choice of when and how to spend your money. Each smart financial decision you make moves you closer to your goals of financial security and being debt free.