Five Ways to Make Better Financial Decisions
The same mental and emotional processes that kept our ancestors alive by avoiding potential predators and deadly food may also be keeping us in a loop of making choices that could impair our long-term financial success. Consider a few key ways you can make better financial decisions based on advice from psychologist Dr. Beth Kurland. While the advice is general, we’ll consider her suggestions in light of making spur-of-the-moment spending decisions:
- Ask why. Being curious about why you might want to make a purchase can stop the automatic buying process. Ask yourself questions such as, “Why do I want to buy this item right now? What made me pick up this item in the first place? Am I willing to put aside my long-term goals to buy this item?”
- Create guardrails in advance. This is where having a budget and a list come into play, but the budget should reflect thoughtful, front-end decision-making to ensure it is realistic.
- Tell yourself a new story. Instead of telling yourself, “I can’t buy this car today,” create a new story: “I’m going to have $X available later for bigger goals (e.g., retirement, college savings).”
- Visualize new behaviors. This may take a bit of work, but spending a bit of time thinking about browsing a store or website without making a purchase can increase the likelihood of engaging that way when actually shopping. (See if your spending choices are helping you build wealth with this QUIZ.)
- Include a mindset of “tough-love.” Being firm in your resolve can also include a mindset of compassion, as Dr. Kurland writes. Wanting something at the moment should be acknowledged, but then the gentle, tough-love mindset should guide you back to your positive financial path.