Life is full of financial decisions. Whether you are deciding how much to spend on your holiday, how to finance your car purchase, which house to buy, or how to invest your nest egg, the consequences of your choices can have a lasting impact on your financial future. Sometimes the way things work out is a matter of luck, but rather than leave your life to chance, here’s how to be smart with your financial decisions.
- Set your emotions aside. Decisions made in a state of excitement, nervousness, fear or greed are often regretted. Financial decisions should be based on cold, hard analysis of the information at hand. If you are not sure what to do, sleep on it, get more information or seek advice.
- Look at the worst case scenario. If things don’t go according to plan, will your financial situation still be secure? How much can you afford to lose?
- Look at the best case scenario, but don’t make it too optimistic. Make your best case scenario your most realistic one.
- Do your financial calculations so you can see in black and white what the implications are. Read the fine print so you know exactly what costs are involved and how your decision will affect your financial situation in the long term.
- Write down the pros and cons on a piece of paper and consider alternative options.
- Make sure you understand exactly what you are committing to, especially when it comes to signing documents.
- Get professional advice. It’s not always possible to know all the aspects of a financial decision or how to accurately predict outcomes. A professional adviser can help you ask the questions you didn’t know to ask and learn from the mistakes others have made.