In a lot of aspects, our financial health of tomorrow is based on the financial decisions we make today. Making informed decisions is sometimes difficult but here are six suggestions for you to implement.
1. Weighing the pros and the cons is helpful.
Try writing out a list detailing the benefits of your choices but also the potential pitfalls. Recognizing the negatives as well as the positives will help you decide if the financial decision is right for you. If you’re having a hard time coming up with any negatives or balancing perspectives, try reaching out to a trusted friend or professional for financial advice.
2. Ask yourself if this is something you really ‘need’ or ‘want’.
Often purchases are made without really thinking it through. Some would call these impulse buys. Ask yourself if you really need to upgrade your phone or are you just falling prey to clever marketing campaigns or social pressures. Have you considered all the alternatives and explored other options? Try thinking about a time that you’ve had buyer’s remorse. This can help you put your decision making process in to perspective.
3. Guard against emotional purchases.
Too often we make significant decisions on major purchases when our emotions are in a heightened state. For example, your water heater fails. You might decide to go with the first company you call instead of taking the time to call a couple more places for quotes. Ask yourself if this is a decision you must make now or can it wait until you’ve researched other options.
4. Don’t put off making a financial decisions.
By not making a decision, you’ve made a decision. If you wait for another day and put off looking at a savings plan, retirement needs or RRSP contribution, taking no action could cost you money particularly over time. Being proactive now will help you from becoming reactive in the future.
Related Blog Post: The Beginner’s Guide to Retirement Planning
5. Be aware of your financial risks.
Everyone has their own risk aversion. Where you might be ultra-cautious another person is prepared to lose money in the short term to ultimately gain more in the long run. Much depends on your stage in life such as do you have dependents or how much time do you have to recoup a loss.
6. Consider your FOMO (fear of missing out) index.
Are you always looking for the next great cell phone, the top of the line car or the best pair of shoes? Then consider how this is affecting your personal finances. It might be time for a reality check to see how much you are spending and realign your priorities.
Many of us lack confidence in making financial decisions no matter the relative size or importance. Consider seeking professional advice from a trusted source. Making informed decisions is especially important when you are going through a job loss, a separation or a medical crisis. This heightens the significance of your decisions. Contact your local not-for-profit credit counselling agency for unbiased advice and information.
Written by: Patricia White, Former Executive Director, Credit Counselling Canada.