1 Key to Making Smarter Financial Decisions
You want to make good financial decisions. We all do. Whether it is as basic as how much to spend on lifestyle each month or as sophisticated as how much to invest in a business venture, your goal is to make the best decisions for you and your family. Where most of us fall down in our financial decision making is not in our intent, but in our focus. Most financial decisions are emotional decisions. We all have wants, desires, fears, insecurities and habits that drive much of our decisions. It's a fact, so don't fight it, acknowledge it and move on. Doing so will free you to work on how to manage your emotions in order to make better financial decisions.
The key to making good financial decisions is to clearly understand your "why". Know it and to use it to drive your decisions. Your "why" is your short and long-term priorities. For example, If your short-term priority is to spend Thanksgiving week in Costa Rica with your wife and children (mine), then your financial decisions should support achieving this. If your long-term priority is to transfer assets to your children and grandchildren then your decision making should support achieving that. The more clear and genuine your priorities are the better. They will help you control the momentary fears and wants that come and go.
We've found that clients that we're able to assist in setting clear, genuine financial priorities make better decisions and achieve more than those that don't. They know what they care about and we use that to walk them back during times of stress or desire.
Have you spent any time figuring out your financial priorities? They can be simple or profound, big or small, short-term or long-term. It really doesn't matter. They won't be set in stone, so as your life unfolds you can adjust them as many times as you want. Just make sure they are clear and genuine.
QUESTION: what is your why? Let me know via Twitter Tweet to @roger_whitney