You’ll be called upon to make a lot of financial decisions throughout your life.
Some will be straightforward and take little thought because the right course of action will be obvious. Others, however, will not come with such a clear resolution, and you may need to take some time to come to a final decision on how to proceed.
Whatever issues you face, making the best decisions possible, based on the circumstances at the time, is one of the key factors when it comes to effectively managing your money.
Making good decisions also helps you stay on track to achieve your financial goals.
As experienced financial planners, we’re always helping clients make decisions about their financial future, from how to save for your retirement, to the best way to secure your future legacy.
Discover five key factors that we believe are important when it comes to ensuring you’re making the best possible financial decisions.
1. Have a plan in place
The best decisions are taken from a position of strength. Having all the information you need to hand, rather than relying on guesswork, can play a vital part in ensuring you make the right calls when you have to.
Most big projects can benefit from starting with a plan, and that applies just as much to managing your money as it does to any other part of your life.
Making financial decisions will often require you to plan ahead. So, whatever you’re planning to do, it’s important to have an understanding of your current financial situation and see where you currently stand.
Thinking about the key components of a plan will ensure you address key issues such as timescale and affordability.
2. Keep track of your finances
By always having an idea of your financial position, even with just a simple income and expenditure spreadsheet, you will be able to get a high-level overview of your finances before you make any big decisions.
This will mean the decisions you make will be informed, rather than you having to rely on guesswork or out-of-date information.
It’s also important to keep track of how much money you have in savings and other investments, and how much you’re setting aside each month for your retirement.
Knowing where your money is, and where it’s currently going, will give you a clear idea of how certain decisions will affect your situation. It also makes it less likely that you’ll make bad ones.
While there’s no need to be obsessive about it, it can pay dividends to keep your spreadsheet as up to date as possible.
3. Discuss any major decisions with your family
Even if you are the main breadwinner, any financial decisions you make are likely to affect everyone in your household.
As a result, it’s important to discuss key issues with your spouse or partner. Not only will this ensure that you’re both on the same page, but it’ll mean that you’re both pulling in the same direction when it comes to securing your financial future.
It’s also a valued second opinion for you to take into account as part of your decision-making. Furthermore, it’s someone who obviously knows you, and your mutual circumstances well. As a result, they will provide the sort of informed insight you won’t get from anyone else.
An additional point that makes this imperative is that they may well be unwittingly acting in a way which could affect your decisions. For example, if you decide to reduce your outgoings for a particular reason, it’s crucial that both of you are doing this.
4. Separate your needs from your wants
It’s important to appreciate that you will often need to prioritise your financial goals, rather than being able to fulfil them all at the same time.
Sometimes, financial constraints will mean something has to take a back seat while you’re putting money towards something else more important.
As a result, it’s important to be able to prioritise your goals, and a good way to do this is to separate your needs from your wants.
If you’re always putting what you need above what you want, you may consider some goals to be out of reach – either in the short term, or over a longer period of time.
The important thing is to understand what you need to focus on at the present time, while not losing sight of longer-term goals, such as building a pension fund to secure your future.
5. Get expert advice before you make a decision
When these choices arise, it’s crucial that they fit in with your financial plan. Otherwise, you might inadvertently disrupt your progress towards your targets.
To our mind, this is why it’s important to get expert advice before you make any significant financial decisions. Yet, research shows that the majority of people do not speak to a professional before they make such choices.
According to research by Finder, only 16% of Australians use a financial adviser or planner, with 42% saying they prefer to manage their own money.
However, after the pandemic and subsequent period of high inflation, an ANU survey found that nearly a third of those surveyed said they are finding it “difficult” or “very difficult” to live on their current income.
This clearly underlines the importance of making effective financial decisions and how key it is to get professional advice when planning your financial future.
Get in touch
If you have any queries regarding your financial decision-making, please get in touch with us.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC legislation, which is subject to change.
