There is an old saying: Don’t go to the grocery store when you are hungry. Why? You are more likely to buy something you don’t need, spend money you don’t have, or buy junk food to eat in the car on the way home.
Many situations and circumstances can lead to impulsive or poor decisions. Are any of the following familiar?
- You feel pressured. A pushy salesperson wears you down until you make a purchase.
- You want to impress. Your friends have nice things. You don’t want to look like the poorest person in your group.
- You are uninformed. You don’t know enough to make a good decision, so you just make a decision, any decision.
- You don’t want to disappoint someone. A friend wants you to go on a trip with her but you don’t want to use up your vacation days from your job.
- You are vulnerable to magical thinking. “This will turn out somehow, someway!”
- You are angry. “I’ll show my ex that I can make it without him/her.”
- You have a desire to acquire. You seek the dopamine rush that can accompany a purchase.
Have a Plan
When you encounter one of these situations, make sure you already have a plan in place that helps you. Start here: Identify what you want, where you are, and what to say, as in the following examples.
Act with Intention
Susan always has her checkbook ready for friends and coworkers when they ask for donations to their favorite causes. This year, when she added up all those small contributions for her tax return she was surprised by how much she had spent. Because Susan knew she had a hard time saying no to the important people in her life, she realized if she was going to break this pattern she would need to come up with a plan.
First, Susan identified which causes were most important to her. Then, she decided the total dollar amount she wanted to give for the year. Although it was hard to disappoint her friends and coworkers, Susan stuck with her commitment by telling people, “I’ve committed all my charitable budget for the year.”
Check in with Your Future Self
Edie was looking forward to remodeling her kitchen. She had long dreamed of granite counter tops and a chef’s range. As nice as those things would be, her primary goal was to retire at 62 years old and move to a warm climate. So before signing with the contractor, she took a step back.
First, Edie revisited and reconfirmed her strong desire to retire early. Next, she reviewed the amount she and her financial planner had decided she would need to put away each year toward this goal. When she added that to her regular expenses, and looked again at the total cost of the kitchen remodel, she realized there wasn’t enough. The new kitchen would delay her move to New Mexico by at least a couple of years. By checking in with her future self, she realized that she was willing to sacrifice her short-term goal of a new kitchen for her long-term goal of a comfortable retirement.
Consider What Could Go Wrong
Marcelle’s sister owns several rental properties. Marcelle is tempted to buy a house to rent out. The down payment would wipe out most of her savings, but she is hoping the rental income would cover mortgage payments, taxes and maintenance. Before jumping in, she scheduled an appointment with her financial planner.
First, together they identified the pros and cons, and the tradeoffs and risks. For example, wiping out her emergency fund was a risk, and if the property was vacant for a number of months she would have to cover the mortgage payments herself. In addition, her sister is a realtor and her brother-in-law a handyman, while Marcelle is a single mom with a full-time job. Next, they looked at whether these risks were appropriate given Marcelle’s whole financial picture. By doing her homework and reviewing potential problems, she was able to make a clear-headed decision. Instead of investing in real estate, she decided for the time being to invest in liquid mutual funds.
You have goals that when fulfilled will make a big impact on your life, help you to be more comfortable, and bring greater happiness. Whether you are vulnerable when you shop when you’re hungry, have a hard time saying “no,” or don’t know how to balance your present-day goals with future ones, remember these three guidelines: act with intention, check in with your future self, and consider what could go wrong.
What do you want to achieve? Do your saving, spending and investing decisions support those goals? My job is to help women make informed choices. Click here for a free 20-minute consult and we’ll talk about how to get you there.
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