Most financially savvy people pay attention to what they save and spend, but you actually make a lot of everyday financial decisions without really thinking about it. You wake up and decide to go to work to earn money, you exchange money for goods at the grocery store and take on debt to buy a new pair of shoes.
Are you prepared to make a financial decision outside of your daily routine, such as buying a new car, considering retirement, planning a vacation, making an investment, going back to school, switching careers or purchasing a home? Follow this advice to make thought-out financial decisions that make sense for your wallet and your lifestyle.
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Understand The Decision
Before you can start considering anything, you need to have an accurate understanding of what is actually at stake financially. Start off by doing research and fully assess the costs associated with your decision. Thinking of buying a home? List out all of the costs including the mortgage, interest, homeowners insurance, maintenance, closing fees and more to get the complete picture of the actual cost.
Take your time with the decision and don’t rush into something that isn’t right for you. Seek a professional’s help to get more information. A real estate broker, financial planner, lawyer or other professional can provide you with expert advice and insight.
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Know Where You Stand Financially
Check in with your finances to see what you can actually afford. Are you hitting your saving, spending and debt reduction goals? Look towards the future– will this financial decision impact your long-term goals?
Have you been saving up for this decision and if so have you hit your target mark? Don’t rush into a big financial decision; take time to save to a point where you will feel comfortable and will have some wiggle room.
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Weigh The Pros & Cons
Sometimes taking a pen to paper is the best way to workout a complicated decision. Write down all of the pros and cons to get an overall view of if the decision makes sense.
Things like natural disasters or job loss can happen out of the blue so consider your absolute worst-case scenarios and decide if you will realistically be able to stay afloat if it comes true.
Most importantly, keep emotion out of your decision and stick to the facts and data at your fingertips. Just because you are excited to get a shiny new car, doesn’t mean it is necessarily a good financial decision to make. Don’t forget to communicate with your partner to know where you both stand on the decision. You don’t want them to resent your tightened budget for your new purchase.
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