5 Questions to Help You Make Better Financial Decisions

by Vincent King · 10 comments

You’re craving a brand new car.

Even though you just paid off Old Reliable and should be enjoying payment free months for the first time in what feels like forever.

Yet, seeing all the shiny new SUVs in your neighborhood is enough to keep you up at night dreaming of the day you’ll own one, too. Soon enough you find yourself sitting on the opposite side of a salesman’s desk, ready to sign on the dotted line for another deal with the devil.

Hasty Decisions Lead to Financial Losses

Living in the electronic age, we’ve grown used to, and now demand, instant gratification. This overindulgence is murdering our wallets. We want what we want and we want it now. And thanks to credit cards and life at the speed of text, we’ve forgotten how to be patient, or to hold out for what we need, rather than surrendering to our fleeting wants.

But buying just to buy will always dig you deeper into a hole you never want to be in. Unless you’re independently wealthy, you have responsibilities that you simply cannot ignore – your rent or mortgage, car payment, education, food, gas, shelter – all are essential to modern life, and none are free.

Often, the two nickels you have left over aren’t enough to rub together, let alone pay for the movie you want to see at the theater, or buy on DVD four months later.

But that doesn’t stop you, not when your credit cards make the purchase as simple as signing your name or pushing a button.

Rushing Headlong into Instant Gratification

When you rush into purchases, large or small, you’re throwing money to the breeze. The movie that you put on your card was awesome! And you LOVED it. But that was $15, including the snack, and that’s if you went alone.

And what did you get out of it?

Two hours of entertainment, if you’re lucky.

Sure, you satisfied your impulse to see a film, and did what you wanted to do. But you lost money to your impulsive need for instant gratification.

The same thing applies to buying a new car you didn’t need. Your old car worked fine. It just wasn’t as fashionable as Mrs. Jones’. It’s pride and vanity that sends you to the dealership, not necessity.

You rushed forward, and were temporarily satisfied. But now you’ve lost. Now you will have to worry about where the money will come from to pay the babysitter next week, and maybe every month after that.

Isn’t constant peace of mind better than temporary gratification?

Pausing Brings Financial Peace

Slowing down long enough to put perspective on where your money is going and what you’re really going to get from your purchases will let you stop floundering with your finances.

Stopping to think will give you time to let the embers cool to gray; time to think about what you’re truly getting from purchasing that SUV, or going out for another expensive movie or dinner.

We buy things because they make us feel great in the moment. But the half-life of that joy is short, and diminishes with every purchase. Sure, you will be happy for a week or even two, but the footprint of those purchases will leave you feeling guilty and resentful.

Stop long enough to question your motives and you can eliminate the cycle of guilt, and earn the peace of mind that comes with being in control, rather than being at the mercy of your emotions.

Ask yourself these 5 simple questions before making your next purchase and you will end the financial floundering and the guilt that follows.

5 Questions to Ask Before Making Financial Decisions

These questions will help you understand the whys behind your buys:

  • What will you gain from this purchase?
  • How long can you expect your happiness to last?
  • Are there lower cost alternatives that will accomplish a similar feeling?
  • What else can you do that will bring you as much joy as what you’re wanting to buy?
  • How much will this purchase really cost, in terms of more money, time, or loss of funds from another area of your budget?

Use these questions to help you see the true cost of impulsive spending and bring you financial peace of mind, one smart decision at a time.

Here are some ways to delay gratification, but what trick do you use to stop you from making impulse buys?

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{ 10 comments… read them below or add one }

Shane July 9, 2012 at 9:57 am

Great tips to live by even if you are not trying to improve your financial decisions. I look as those questions everytime I make a purchase.

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Jules July 9, 2012 at 10:21 am

I look at things this way: if I’m going to spend money on something, it’d damn well better be worth it. For clothes, I want natural fibers, no polyester. For dinners, it’d better be something divine. For movies, if I don’t have my mind blown through my ears, I’m going to be very disappointed.

It means that I don’t get a lot of things–I buy maybe one article of clothing every year (line-drying everything makes things last forever), and we go out for dinner maybe twice a year. But when I do buy something, it’s Nice (natural fibers, from a boutique store, fits great), and when we go out to eat, the place has at least one Michelin star. Movies do tend to be a bit trickier, since we have very different tastes, but it’s almost always possible to find something we both love. Technically speaking you could say that these are a phenomenal waste of money, but on the other hand we still discuss “Contagion” and remember the cheese course quite fondly.

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Lance@MoneyLife&More July 9, 2012 at 10:38 am

This is so true. I almost always try to wait because I know I get excited sometimes but I also know it wont last. The question to ask will definitely save you money if you answer them honestly.

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Marbella July 9, 2012 at 12:20 pm

Impulse buying is the worst buys. As a former boat owner said: My two best days on the boat was the day when I purchase it and the day when I sold it.

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Bobby July 9, 2012 at 2:07 pm

This is and interesting subject. I often find that the larger purchases often need more time for that mental dialogue for debate and proper consideration. I agree that most of the mundane expenses can accrue to be quite expensive over the long run. Most of the time, our impulse spending can get the best of us, however, it is somewhat difficult to think of the opportunity costs involved in the purchasing of a movie ticket. Typically for clothes, movies, or a burrito from Whole foods, our spending habits are pretty much established. We can afford it, or we cannot, and if we were to spend $15 on a movie ticket there was most likely some thought process involved. Great article, thanks for the tips!

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MoneySmartGuides July 9, 2012 at 3:36 pm

I have a note in my wallet with my long term goals in it. When go to make a purchase, I see the note and it forces me to ask myself, “is this going to help me get to my ultimate long term goals”? In the majority of cases, it won’t. I put the item down and mull it over over the week to see if I really do want it.

This trick doesn’t stop me from buying anything that isn’t promoting my long term goals, but it helps me from buying random junk just because I get caught up in the moment.

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Bobby July 9, 2012 at 3:46 pm

Thats a great strategy. It really makes you think of the intrinsic nature of the item being purchased, not to mention the financial impact that may come with the purchase. I have come to find that if I spend a lot of time thinking about buying a certain product (usually of minimal cost) it is not something that I truly want/need. If it is a larger expense, that type of reasoning is exactly what one should go through.

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Jean July 10, 2012 at 4:30 am

I hear you about increasing amount of instant gratification in present day society. I see it a lot and sometimes from myself too. It’s funny that you would mention the movie example as I too recently decided to skip on a movie to watch it on DVD a few months later. I decided to only watch those movies in the theater that are absolute blockbusters and ones that I am looking forward to for ages.

-Jean

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Ken July 12, 2012 at 11:59 am

My girlfriend and I recently took my too small kids to see Brave in 3D. I bought the tickets while she ran back to get sweatshirts from the car. $55 for 4 tickets and the we went for snacks. After I bought the snacks, $25, I was pretty much in shock. After the movie and the kids were asleep, we sat down and realized how much we had just spent for 1.5 hours of a movie.

For quite some time to come, it is going to be Redbox ($1.50 for Blu-ray) and microwave popcorn. Even through in sodas and your under $5. It might now be 3D and on a giant screen, but still fun. We made a fort in the living room and watched a movie in there and had a blast. And I did not have to ask my daughter to talk quieter.

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Angie July 15, 2012 at 4:11 pm

I agree with pausing before you buy, no problem. But there are so many people that go to their graves and have not lived. There are certain thing that we can do without like the $8 value meal 2-3 times a week from the fast food place because you don’t feel like cooking or the happy hour spot after a hard days work. I know sometimes you feel you go to work everyday just to pay bills. I would suggest finding a way to make a few extra bucks to buy the extra things you want. By the way you only live once

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