Smart Financial Decisions
3 Common Sense Tips to Help You Make Smart Financial Decisions
It’s no secret making the right choices with your money can pay off big time. The financial tips we offer will hopefully make it a little easier for you. It doesn’t matter how big or how small your financial decisions are, it will have an impact on your life.
If we were able to make the right choices all of the time, we’d be well on our way to earning a high credit score, and building wealth. Most of us though, are unable to do this on a consistent basis. As a matter of fact, not even most of the time.
In today’s society especially, we’re being bombarded to spend our money. Through television, e-mails, and other media, clever marketing finds many ways to get you to spend your hard-earned money on things you don’t need.
Hopefully, our three tips will help you to make sound financial decisions that will pay off and lead you to a successful future.
Define your financial objectives
The very first thing you need to do if you want to make sound money choices, is to decide how you want your money to work for you. By that, we mean, perhaps retiring early is one of your goals. Or, maybe you want to travel and see the world. The important thing is, set that goal, and the necessary steps to achieve it.
If you define your financial goals, you will be better able to make smart money decisions. Using the early retirement goal above, you can determine how much it will take to save and invest in your retirement account each month. Creating a workable budget should be the first step before defining these goals.
When you outline your financial goals, you may find that some short-term changes to your budget will result in long term benefits. Often times, it is easier to sacrifice for a short period of time when you are able to see the long-term benefits.
Plan for the long term
As you make financial decisions, don’t just consider the short-term implications, but consider the long term as well.
As an example, say you plan to fund a vacation using your credit card. You need to consider what an expenditure such as this will have on some other budget categories. Even if you plan to repay this added debt as quickly as you can, consider what effect it will have in the long-term.
Will using a credit card to fund a vacation have an adverse effect on your budget? Could it possibly lead to carrying more debt than you planned? Is it possible some other goals may have to wait because more budget funds were required to repay the credit card debt?
Suppose your main goal was to retire early, and you had to postpone it because of lack of retirement savings? This is why we emphasize considering long term implications. By doing that, it will help you to make better and sound financial decisions.
You should always take the total cost into consideration
Have you noticed over the past year how marketers are promoting sales? They promote the monthly payment only. From home purchases down to computer software, they emphasize the monthly payment, and a lot of individuals are falling for it.
I’ve seen many “good deals” on software for my business advertising monthly payments of $5.00. In time past, they sold the same software for a flat amount of say $100.00. Now, they reel you in for a contract of $5.00 a month for one year, automatically renewable forever, hoping you won’t catch it because the amount is so small. Many individuals are suckered into these scams and often times pay for two or three years.
On any purchase that you make, always consider the total cost. In the software example above, I’ve seen the $5.00 monthly payment in large letters, but when you squint and read the small print, it says that you will pay the monthly payment amount for the full year up front.
When you take the total cost into consideration, you’re in a better position to make a sound financial decision. Don’t be fooled by creative and deceptive marketing practices trying to convince you that you can afford their low monthly payment.