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How To Make Better Financial Decisions (Starting Now!)

Decision making affects everything you do in financial planning. When you make heat-of-the-moment decisions that don’t align with your priorities and long-term goals, the impact is often greater than you initially realized.

Money can cause considerable stress which can negatively impact your ability to make a good decision. When you are stressed, it’s harder to see things objectively and with clarity. 

In most cases, when stress piles up people tend to neglect their financial health leading to bad habits. Some of the most common examples are, 

  • Overspending

  • Decision avoidance 

  • Paralysis from analysis

  • Prioritizing less important decisions

All of these examples have a compounding effect. When you neglect to prioritize strong financial decisions, it is more challenging to return back to a state of good financial health.

Personal finance is vital to the health and well-being of a family. Financial planning can give you control over your finances and can impact your life decisions, which ultimately affects your lifestyle. When you make better financial decisions, you create a fulfilling, more thoughtful and sustainable lifestyle. 

Here at Mountain Pass Planning, we help our clients stay on task and hold them accountable to make 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 you can directly assess what’s most important to you is by creating a totem pole of importance. 

A totem pole of importance is a tool where you write down tangible things most important to you. Then look at a credit card or a bank statement to see where you spend your money. You can assess the total flow of importance in your life by comparing what you wrote down with the outflow of your money. 

Ask yourself, “Do my spending habits align with my priorities?” If not, then start prioritizing your finances according to your values. When you have created those priorities, you can use them to guide your decision-making process. 

Establishing healthy priorities will connect your spending to your financial goals and values, making every dollar more intentional. For example, if paying off your mortgage is a top financial priority then you may take additional measures to not spend extra money on dining out, subscriptions, or other “extra” expenses. If you don’t have a totem pole of importance, then what’s guiding your decision making? 

It’s important to be mindful of the following when prioritizing your finances: 

  • Nobody has infinite resources, so you must choose carefully

  • You’re going to have to make trade-offs

  • Knowing your values and your priorities can help you make decisions 

Some important financial trade-offs could be:

  • How much “house” you can afford

  • What type of car you want to buy vs what you should buy

  • The type and scope of vacations

  • Where to send your kids to school

When you opt to do something in the present that is more costly than an alternative, then, later on, there will be a particular trade-off in your life. If you decide to send your kids to private school, you may have to retire later or push back renovating your kitchen. 

Maximizing Wealth vs Maximizing Life

When it comes to building wealth, everyone is eager to find the best scenario i.e the best way to find monetary success. It’s easy to get caught up analyzing numbers and “what-ifs” from spreadsheets in your search to find the most optimal way to manage your finances. 

While a noble effort, you will often find that choosing the “best” approach will not give you as much peace of mind. Go back to your totem pole of importance and assess what you value most. The key is to find the balance between maximizing your wealth and living out a fulfilling life. It is important to weigh the pros and cons and decide what choices enhance your finances while providing you fulfillment and peace of mind.

Turn Your Life Philosophy Into An Action Plan

Decisions should positively impact your lifestyle both now and in the future. We often spend our resources (time and money) on things that don’t fulfill us, and may actually hurt us. When analyzing a decision, ask yourself the following questions,

  • Will this choice support my dreams and values?

  •  In what ways does this decision impact me or my family in our future? 

  • Will this decision promote our well-being down the road? 

These kinds of questions help you to give your best and provide additional context for the many ways your choices impact your life. The goal here is to align your values with your financial actions. 

Take Baby Steps 

Making strategic, mindful decisions will change the way you carry out your personal mission, financial decisions, and long-term financial and lifestyle goals. Once you’ve established your values and goals, you need to make consistent micro-decisions that support those big-picture decisions. 

This can include setting your own personal boundaries like making a monthly budget and sticking to it even when there is an amazing sale or deal on the line that doesn’t fit into your plan. It also means avoid spending money on non-priorities, creating a concrete strategy around your debt repayment, and adding intention to your long-term savings goals like investing a bonus from work or leftover money from your monthly budget. 

Once you start to develop these strong financial habits, it will impact the way you approach money especially how you respond to disruptive trends like our current epidemic, a recession, loss of household income, the death of a family member, or the gain of an inheritance. 

Daily well-made micro-decisions is a sure way to help move you toward your goal. These changes also change your mindset one decision at a time, creating sustainable brain patterns and concrete behavior that affects financial thoughts and actions for the long-term.

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!