A 2-minute read!
Decision making affects everything we do in financial planning. When we make spur-of-the-moment decisions that don’t align with our priorities and long-term goals, the impact is often greater than we initially realized. Money can cause considerable stress which negatively impacts our ability to make good decisions. When we are stressed, it’s harder to see things objectively and with clarity.
In most cases, when stress piles up, we tend to neglect our financial health leading to bad habits. Some of the most common examples of this are:
- Decision avoidance
- Paralysis from analysis
- Prioritizing less important decisions
All these examples have a compounding effect. When we neglect to prioritize strong financial decisions, it is more challenging to return to a state of good financial health. (Read that again!)
Strong personal finances are vital to our health and well-being. Financial planning can give us control over our finances and can impact our life decisions, which ultimately affects our lifestyle. When we make better financial decisions, we create a fulfilling, more thoughtful and sustainable lifestyle.
At Mountain Pass Planning, we help our clients stay on task and help hold them accountable in making their best financial decisions. How do we accomplish this goal? Let’s find out.
Create A Totem Pole of Importance
Have you ever assessed what is most important to you, your kids, or your family? One of the ways we can directly assess what’s most important to us is by creating a “totem pole” of importance.
A totem pole of importance is an exercise where we thoughtfully write down the things that are most important to us. Next, we look at our credit card and/or bank statements to see where we spend our money. We can assess the total flow of importance in our life by comparing what we wrote down with the outflow of our money.
The next step is to ask ourselves, “Do my spending habits align with my priorities?” If not, then it’s time to start prioritizing our finances according to our values. When we have determined those priorities, we can use them to guide our financial decision-making process.
Establishing healthy priorities will connect our spending to our financial goals and values, making every dollar decision more intentional. For example, if paying off our mortgage is a top financial priority then we may take additional measures to not spend extra money on dining out. If we don’t have a totem pole of importance, then what’s guiding our decision making?
It’s important to be mindful of the following when prioritizing our finances:
- No one has infinite resources, so we must choose carefully
- We are going to have to make trade-offs
- Knowing our values and our priorities can help us make good decisions
Some important financial trade-offs might be:
- How much “house” we can afford
- Should we purchase that second home or vacation home
- What type of car we want to buy vs. what we should buy
- The type and scope of vacations
- Where to send our kids to school
When we opt to do something “in the present” that is more costly than an alternative, then, later, there will be a particular trade-off. If we decide to send our kids to private school, we may have to retire later or push back renovating our kitchen.
Mountain Pass Planning is an independent, subscription based Financial Planning company. Let’s work together to prioritize, organize, and strategically align your finances with your values. We want to help you make better financial decisions, gain more control of your finances, and design a more intentional way of living: One decision at a time. Give us a call today at (845) 592-0789!
Next week: How to Make Better Financial Decisions in 2022: Maximizing Wealth vs. Maximizing Life