How to make good money decision

Being intentional with the choices you make with your finances has the potential to create a fulfilling life and lifestyle. I think we all want to make the best money decisions we. So, in honor of April being financial literacy month, here are 7 of the best money decisions you can make before turning Knowing why money is important to you can go a long way toward informing your actions around money. Knowing your why can help prevent aimlessly misdirecting your money on whims and focus it on the areas of your life that matter to you. Knowing your why aligns your money with your values and serves as makee foundation for the financial goals how to make good money decision support the life you really want to live.

Fun purchases

People resolve to save more and spend less, pay off debt, and accumulate funds for a future purpose. But even if you have those goals firmly placed in your mind, when it comes to the action steps and decisions it takes to reach those goals, many people battle internal thoughts and external stimulus. There are two voices playing in your head. Typically, one voice outshouts the other, making it the winner of your decision-making process. Your inner voices battle, unless one is clearly stronger than the other, and it will lead you to one of two paths: living closer to your values or money misery. The voice that is urging you to go off plan will typically awaken that feeling in your stomach reminding you about that something that might not be aligned with your values. You know from your money history whether your decisions have led you towards positive outcomes or frustrating problems. Chances are, you might not even remember what you thought or felt — your decision might have been that quick and decisive. But nonetheless, there was a process.

Monthly payment decisions

There is almost always a better, or best decision when it comes to money, but a good decision is better than making none at all. When it comes to saving, investing, launching a business, lending money, anything having to do with money the key to getting ahead is always making good decisions. Good is often good enough. When I really started taking money seriously, I started making good money decisions. The good money decisions are all about building your foundation. They work. Because I was afraid of making a bad decision. So because of the fear of being wrong, I just did nothing. So I did nothing. I was afraid so I did nothing.

Choose your subscription

On Quora, more than people responded to the question, «What is the single best financial move you have ever made in your life? From becoming a minimalist, to never borrowing money , to buying a condo at exactly the right place and time, here are 13 of the best money decisions people ever made that changed their lives for the better. I have never borrowed money to buy anything. I only bought what I could pay for By earning very little and living simply, I stayed below the poverty level and paid very little taxes My home is small, located in an area with low economy so bills are low for energy and taxes also. Ate simply for much of my life, opting for water over unnecessary beverages, saving money and avoiding ensuing health consequences.

1. Getting a College Education

Advertiser Disclosure: The credit card and banking offers that appear on this site are from credit card companies and banks from which MoneyCrashers. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. Advertiser partners include American Express, Chase, U. Bank, and Barclaycard, among others. Every day you make financial decisions. Some are minor, like buying a new outfit. Others are major, like deciding to start a new job. But all of them, large and small, can have an impact on your future.

Making a major financial decision

It could be buying a house, buying a car, accepting a job offer , hiring a lawyer , accountant, or other professional, etc. Major financial decisions can be difficult to make, and more importantly, can have a long lasting impact on your financial health. Here are some tips that may help you make eliminate the noise and make the best decision for your situation. Listen to your gut. Did the financial planner you met with seem concerned about you and your financial interests, or did he give you the hard sell on a high priced mutual fund? A gut check is valuable because it can serve as your first line of defense and help you quickly eliminate some options from consideration. Do your research. Using your first impression can help you quickly eliminate some options, but not all options. The examples I gave above helped me avoid buying a clunker and avoid using a broker who was more interested in racking up fees than making me money. For that I had to continue my research. List pros and cons.

1. Knowing your why

This universal mental accounting quirk causes us to rely on the first piece of information we hear to make decisions. Suddenly, that number becomes your anchor point, and you compare all other home prices to this number. This becomes a serious problem if the average home price in your area is wildly different from what your coworker paid. However, financial anchors can do more than just warp your sense of an appropriate amount to pay. Intentionally adopting anchors can also help you to make better money decisions.

Here’s. There are basic rules of thumb for what percentage of your income you should spend on housing, car payments, and the like. For instance, you’ll often see the claim that you should not spend more than 30 percent of your monthly income on your rent or mortgage. To make this an anchor point that can actually help you make better financial decisions, take the time to do the math and use your anchor point as a hard stop for what you are willing to spend.

If you decide ahead of time that your anchor point is the absolute maximum you are willing to spend, then it’s easier to say no to the options that may seem like they’re only a little bit outside of your price range. With an unyielding dollar amount already chosen before you begin looking at apartments, cars, or other big ticket items you plan to pay for monthly, you can help prevent temptation from encouraging you to outspend your budget.

Even if the percent rule is unreasonable for the area where you live, you can still use the process of creating an anchor point to help you stay within the budget that makes sense for your area.

I’m an avid audiobook listener, and have been an Audible subscriber for several years. Despite being a financial expert, I regularly cannot figure out if it makes financial sense for me to purchase an audiobook outright or use one of my «credits» for the purchase.

Anchoring could help me to make these decisions less onerous. Any fun items you like to purchase can benefit from a similar hard anchor point. If you love buying notebooks, shoes, music downloads, or the like, setting a hard limit on the maximum amount of money you can spend on any one purchase will make it easier to leave the tempting but expensive items on the shelf. Of course, even with such an anchor, you still need to make sure you know how much you’re spending overall.

Each purchase below your anchor can still add up to quite a large amount if you’re not paying attention. If you’re time-strapped, hiring someone to help you with necessary but unpleasant tasks can be a huge lifesaver. However, for a lot of people, the costs of a housecleaner, dog-walker, or personal assistant can feel far too high.

Many will decide that they’ll just do the mopping or other tasks themselves. The problem with this plan is that it still keeps you time-strapped, and it’s likely the tasks will go undone or poorly. Anchoring can help you to make the decision about whether it’s worthwhile for you to hire help.

Calculating how much your time is worth will give you a baseline that’ll help you determine what you can afford from service providers. To figure out your hourly net worth, divide your annual income by 2, The average American works about 2, hours per year. The anchor point of your hourly net worth can put the cost of a service in perspective since it gives you a concrete amount to compare.

Creating personal anchors to help you make better financial decisions can give you a great mental shortcut. But it’s important to update your anchors every so often — once a year — to make sure you’re not making important new decisions with outdated anchors. Your money choice shortcuts are only as good as the anchors you’re using, and if you’re making decisions based on your income from a more lucrative job, the prices in a lower cost-of-living area, or old prices that have risen because of inflation, then you’re likely to overspend, frustrate yourself, or even get embarrassed when you use an outdated anchor.

Knowing the maximum that you’re willing to spend on something gives you a great way to know when to say no. Having such a hard-and-fast rule allows you to make smarter decisions more quickly and with less temptation. Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.

Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon. About Contact Advertise.

Credit Cards Personal Finance. By Emily Guy Birken on 13 May 0 comments. Wise Bread Picks. Tagged: BudgetingLifestyleanchoringbudgeting tipscognitive biasmental tricksmoney decisionsmoney moves. Related and Popular. What to Do With a Windfall.

Average: 4 1 vote. Emily Guy Birken. Former educator and author of three personal finance books. Most Popular. User Agreement Privacy Policy.

How to make hard choices — Ruth Chang

Sign in. Accessibility help Skip to navigation Skip to content Skip to footer. Choose your subscription. Not sure which package to choose? Try full access for 4 weeks. For 4 weeks receive unlimited Premium digital access to the FT’s trusted, award-winning business news. Premium Digital.