5 Questions to Ask Yourself Before Making Big Personal Finance Decisions

Spending money is something we all do basically everyday. Oftentimes we don’t even think twice about it. We are trained to swipe a card and make the monthly payment, we have become numb and disconnected from our money.

In order to reach our goals, we need to be sure we aren’t setting ourselves back. Big decisions often take time and it’s important to weigh your options to help you make less-bad choices with your money.

To help in making important personal finance decisions, here are five questions to ask yourself before making those big decisions.

Do I understand what I’m signing up for?

There are things we do on a daily basis that have a major impact on our finances, and we don’t even take time to think about the downstream effects. Whether we are taking on new debt, refinancing a loan, deferring a payment or carrying over a credit card balance, our monthly cash flow is affected.

Luckily, it’s not always affected negatively but it’s important to understand what each of these items mean to your bottom line. Before you sign up for anything, research which questions you should ask and what you should know before  going into the deal to ensure you are prepared and not caught off guard if something comes up.

Why does this have to happen now?

We often find ourselves in a pickle financially because we made a quick decision in the moment that we thought would be a great idea (The Hangover anyone?). Well I hate to break it to you but your future self is usually less that impressed with these spur of the moment choices.

If you’re buying a new car, is it because your old one literally needs a new engine or is Tesla’s  new model blowing your mind? Are you house hunting because you are now sharing a bedroom with your kids or because you got a raise at work and could use the extra space? 

Understanding why this is happening right now will help you decide if it has to happen right now or if it can wait. If it can wait, this allows you to save a bit of money to prepare and take less of a hit to your checking account.

What would I do with this money if I didn’t spend it here?

Let’s go back to that car loan example. If I were to venmo you $246 each month, would you spend it on a car loan or would it be going towards something else? If you immediately start thinking about that beach vacation, a new patio set, hockey equipment or anything else besides the car, you might not need the car.

Start thinking about debt and expenses as opportunities to spend money on something that makes you happier or your life easier. This will allow you to stress less about, “can I afford this payment?” and dream about “what could I be doing instead”?

Am I trying to make someone else happy?

Your life should consist of only the things that bring you the greatest joy, and nothing else! I often like to purge things in my house as I feel the clutter building up. I then start to wonder, why did I even buy this in the first place? The answer is usually because I found the thing at a thrift shop and it was too cheap to pass up or I was at a friend's house and saw the thing and had to have it myself.

When we are alone with our thoughts we are truly able to imagine our dream life without the influence and clutter of other people’s opinions. What are you buying to look a certain way? Are you spending your time on things that are based on loneliness, missing out, the latest trend or what you “should” be doing? If so, it’s time to let that go!

Does this align with my larger goals?

At the end of the day, we only have so much money to work with. The only goal for that money is to allow us to live a happy and healthy life, with those we love most and in a place that speaks to our soul. That’s it. 

When we waste money on things that don’t bring joy or we spend it chasing something that we no longer want, we are throwing away precious resources that could help us live that best life.

It’s important to know what your version of “best life” looks like and map out how to get there. Focus your savings and align your spending on reaching those goals, you’ll be happier because of it.