To improve your financial situation it is important to be able to make good decisions. On this episode of Money Mile, you’ll learn 7 tips I have on how to make better financial decisions. My goal is for you to be able to have the tools to help you make the best decisions possible when you are faced with a myriad of options. Let’s share a mile on your long steady run while you work to build a better life.
You will want to hear this episode if you are interested in…
- Doing over learning [0:30]
- The things you can control [2:20]
- Moving or not moving [7:15]
- Effectiveness before efficiency [9:40]
7 tips on how you can make better financial decisions
- What you do is more important than what you know. There’s no sense in researching a financial topic if you’re never going to act on what you’ve learned. Research won’t help you move forward to improve your financial situation if you fail to implement your newfound knowledge.
- The best strategy is one you will implement. There are thousands of financial choices that you can make. The only one that matters is the one that you choose to implement. Focusing on the things that you will do and do consistently over time will put you on a forward trajectory. When choosing one of the myriad financial decisions, consider choosing the one with which you will make forward progress.
- Focus on the things you can control. To improve your financial situation, focus 80% of your time and effort on what you have control over. The next area to focus on is what you have an influence on–spend 20% of your energy on this area. That leaves only 1% (or less) of your time and energy to focus on that which you have no control over. (see Decision Making Visual #1)
For example, you can’t control the tax code. You can complain about it, but doing so will do nothing to improve your financial situation. However, you do have control of your savings rate. Focus your efforts on improving your savings rate and you will improve your finances.
- Create a framework for decision-making. Once you focus on the controllable then you can consider what is important. To do that you can use this framework to help you recognize priorities. Is this action of high impact, and urgent, high impact with low urgency, low impact and urgent, or low impact and not urgent (see Decision Making Visual #2)
- Move small or don’t move at all. Just like you don’t start getting in shape by running a marathon, you don’t have to start saving by investing $100K. Start getting in shape by walking around the block and start investing what you can afford–maybe even $100 per month. Even by starting small, you are moving in the right direction. Over time you can reevaluate your situation to see how you can grow further.
- Learn what works for you by doing. Learn what investing or saving method works for you by trying different things. Start small to see what best suits your goals. There are 2 types of investments, the fancy ones and the ones that work. What works for someone else may not work in your situation. Try a few types then choose a method that works for you.
- Effectiveness before efficiency. Start with what is effective over efficiency. Learn how to choose an effective financial strategy by listening to this episode of Money Mile. Remember if you work out everything else will too.