Make good financial decisions it is something that should not be that hard. In fact, as I wrote in this post, our judgment is based.
In that sense, my financial decisions always been guided by a basic principle: if I’m not sure what I want to do, I do.
I labor the back to earn my money and therefore not going to risk in making financial decisions that have no sound basis or which you have doubts. It’s that simple and that clear.
Basics to make good financial decisions
From my point of view, there are three important rules that must always go if we want to be able to make sound financial decisions:
I never take financial decisions unless the person fully understands
Just do not put a dime into an investment option that is not 100% clear to me. If I myself can not explain it in detail to my wife or my children, then my money will not go there even if it was the best investment available in the world.
If I’m not sure what I want to do, I keep my money available
When I evaluate financial decisions, and I’m not sure what I want to do, I leave my money in a mutual fund short-term and daily liquidity.
Of course, lower interest generates inflation, but also liquid, which means it can easily access it when you are ready to make a decision. Furthermore, this type of investment funds (thinking those who have the highest ratings) are very low risk instruments, which means they are a good place for our money while we’re waiting for our financial decisions.
Before taking significant financial decisions, seeking various sources of information
I always thought that the different opinions on personal finance add value. This means not only search the internet – because there can find good and bad information and is often incorrect. It also means looking at magazines like Investor, Money or Kiplinger.
It means looking at personal finance blogs people whose opinion I respect. It means reading books on the subject. It means talking to people skilled in the field.
If the answers guide me roughly the same direction then I make my decision, but if I get different opinions then seek advice from someone qualified who can help you evaluate the pros and cons of different alternatives.
Interestingly, I have taken the time to seek information and learn everything you can about the decision I am making: insurance, investments, retirement plans, makes me feel much more comfortable and confident that I’m making the right decision.
To date, though I’ve made mistakes and things I could have done better, I learned from them. And honestly I have never felt that I was mistaken in a serious way.
I evaluate whether these financial decisions approach me or keep me from my goals
The raison d’etre of personal finance is to seek to achieve our goals and life goals. In this regard, before making financial decisions we must evaluate if we close or away from them.
I always thought that it’s okay to enjoy the money we spend and buy some things I really want to have. But we must find a balance. For example, is it okay to buy that flat screen 18 months without interest, even if it means leaving – at least during that period – the savings we are making to the education of our children?
Is it worth to put off saving for our retirement to make this trip?
If we decide to make the trip, how will that impact in the future?
There is no right answer, because each person is different and value things differently. But precisely for that reason, before making financial decisions we must understand what the consequences and implications are involving.
I take responsibility for my financial decisions
This is something fundamental. For more tips and financial advice we receive, we are in the end we make financial decisions.
Therefore, we must accept the responsibility of making those decisions. Let us not seek to charge the blame on others: the typical “invested there because I advised the bank officer, or my neighbor who is so successful.”