Personal Finance Advice

We are faced daily with an overwhelming number of choices, particularly when it comes to spending. A simple choice like buying shampoo can turn into a ten-minute decision if we consider overall price, bottle size, brand reputation, specific variety (for oily hair, for straight hair, for red hair, for thin hair), per-unit price, coupons, and sales. The local Wal-Mart offers more than seventy different types of shampoo, and their selection isn’t a particularly large one.

These choices don’t even account for decisions we make before entering the store — Do I really need shampoo right now? Can I make it stretch by adding water, using less, or washing my hair less often? Should I wait until there’s more on my list before I go to the store? Which store should I visit? Should I shop online for it? Should I wait for it to go on sale?

You might not even be aware you’re making so many decisions, but our culture offers far more choices than it did a few decades ago, and more choices mean more decisions. For anyone wanting to save money, more choices can also mean more hazards if we don’t choose well. Too many choices to buy a nice meal out here and a trendy new picture frame there can limit our choices later (Without money saved, you won’t ever get to choose between the cabin in the mountains and the house at the beach — or an RV — when it’s time to buy that vacation home you always wanted).

Sound finances are all about making good decisions; improving your decision-making skills will improve your money management skills. Several formal methods exist for making decisions. A formal decision-making technique may be useful for big purchases, and seeing the decision-making process on paper can even help you improve the way you make decisions when faced with everyday choices. However, none of us has time to perform a formal cost analysis or draw a decision tree for every one of those thousands of decisions we make each month. So how else can we improve our decision-making skills?

For one, we have to set priorities. Setting priorities is a weakness for me, not so much in spending but in time. I want to have more time to write, more time to read, more time to do crafts, more time to travel, more time to spend with my family, more time to exercise, more time to see friends, more time to volunteer, more time to… you get the picture. The reality is, however, that I only have twenty-four hours in a day. If I waste my time doing something that I don’t have to do and don’t really enjoy, I never get that time back, and I may not get around to doing something I should have made a priority. Which of the things on my “to-do” wish list really matter? I have to put my time there.

The same goes for money. I only have a set amount of money. I know that I have to pay the mortgage and utilities and grocery bills. I also know that I want to go out to eat occasionally and travel a bit and see my husband retire. However, if I fritter away my cash on magazines at the checkout counter, pretty jewelry, and craft projects I never get around to making, I won’t have the money to pay the bills I have to pay and do the things I really want to do. Asking myself if each purchase is a priority helps me make sound decisions.

If you are particularly weak at making decisions, you may need to talk to yourself as if you were a child. You know — “You can have the lollipop or the bubble gum but not both.” Force yourself to choose between two things you want, rather than allowing yourself to buy both. Too many people wind up with identical shirts in two different colors because they can’t decide which they like better, and many of those second-colored shirts stay in the closet, unworn.

Sometimes, timing matters. If you take too long deciding whether to buy a tin roof or shingles, your old roof may start leaking, leaving you with much bigger worries than which type of roofing material to use. That’s an extreme example, but we often put off making choices so long that the choice is made for us — one of the options is discontinued, the price goes so high it becomes unaffordable, or the kids are college-aged before we’ve saved enough to help them with tuition as planned.

More often, salespeople use our fear of missed opportunities as a means of pressuring us into buying before we’re ready, often making purchases we regret. Strong decision-making skills help you find a balance between putting off a decision too long and rushing into a purchase (If you feel forced to buy something right now, the salesperson probably knows that you will decide not to buy if you have time to think through the decision rationally).

Once you make a choice to buy or not to buy, don’t look back. If you find you made a mistake, learn from it for the future, but don’t spend too much time wishing you had bought something else instead — and certainly don’t go back to buy that something else in addition to your initial purchase (unless it is a necessity). If you do make a mistake you can’t live with, consider exchanging the purchase if you haven’t yet used it.

The good thing about making decisions is that most of us get better with practice. It’s called gaining wisdom. Being aware of the choices you make, setting priorities, and thinking through decisions can eventually become second-nature, so that you are able to make wise choices nearly every time without going through a formal thought process. Wise spending choices, even “small” choices, lead to more money in the bank so that you can choose to buy more of the things you are saving for and buy them sooner.

Image courtesy of ::: Billie / PartsnPieces :::