Use This Tool to Make Financial Decisions!

In this article I will introduce a tool I learned somewhere for making decisions in general. I also find it a great decision maker for financial decisions. Having a tool is great when you’re making decisions because it will allow you to determine if you really need something or if you can really afford it. It also forces you to take a timeout before you commit to putting down money to buy something.

The Tool!
The tool is simple enough, all you need to do come up with the pros and cons of a decision you’re making and give each decision an importance point.

For example, if you’re deciding to buy a new coat write down why you should buy it and why you shouldn’t buy it. You have to be careful to make sure you are fair with your decisions. Just because you want it, isn’t a good reason. Getting the coat because you actually need something to wear through the warm weather is a good reason.

So let me demonstrate how you would use this tool.

Reasons why I want/need this coat:
It will keep me warm through this cold winter: +5 points
It is affordable and within my budget: + 5 points
It matches the rest of my wardrobe: + 5 points

Reasons why I don’t want/need this coat:
I already have 4 other coats: + 5 points
My credit card has a pretty big balance on it: + 10 points
I could buy another coat that doesn’t have Gucci written on it for $300 less: +10 points

So if you tally that up you get +15 points vs. +25 points. And thus, the reasons to not buy the coat win and you should not buy the coat. Like I said you have to be fair with your points, you can just make “Because I want it +4,000 points” then there would be no point in doing this at all. Actually think about how one purchase will affect you, and trust me each of these purchases over $50-100 should make you think twice before you shell out the cash or the credit card.

Mo2 Thinks
I really want you to realize how some purchases can really hurt you in the long run. I always talk about compound interest and how time can work in your favor if you let it. You need to realize that if you make enough of these purchases it could lead to a later retirement or less college education savings for your children. It could even lead to greater credit card balances and thus interest, and even delaying paying off your mortgage.

I want you to understand that every financial decision, especially in the times that we are in, is important. Do yourself and your pocketbook a favor and think out your purchases before committing any sum of cash into buying something.

Thank you for reading as always and if you haven’t already, please subscribe to my feed! I will update daily unless I’m super busy!