Making good financial decisions sits at the base of financial success. Really all financial advice revolves around that one goal — helping you make good financial decisions. It truly is that simple. But actually making good decisions is far more difficult.

There are steps you can take to make good financial decisions. These steps are simple to understand, but not necessarily easy to implement. Follow them and you will increase the likelihood of making good decisions and having financial success.

  1. Be deliberate: We have all taken on certain responsibilities and accepted certain obligations. Allowing those responsibilities and obligations into our lives deliberately can help make good decisions. We understand that a certain decision will impact an obligation, and can use that as a part of our decision-making process.

    But we also take on some obligations and responsibilities without deliberately doing so. You might decide to live somewhere because that's where your family has always lived. Or you may think you have to fund your child's college education without determining if this is something truly important to you. These responsibilities and obligations that have not been chosen deliberately can harm your ability to make good decisions.
  2. Create structure for making decisions: Give yourself tools that will help you make good financial decisions. This could come in the form of a checklist that you review before you spend a large amount of money. The classic example is freezing your credit card in ice to give yourself more time to fully consider a decision. Use cash for expenses. Once the cash is gone, you've built structure that allows you not to spend more (so long as you don't cheat).
  3. Be silly (sometimes): Not every good financial decision needs to be a wise financial choice. Money is meant to support your life. If your life calls for a bit of fun, use some of your money that way. It is important to be silly. It is also important to be deliberate about this. Know what you can afford to be silly with. Make the decision consciously and with control. Going to the circus and buying some concessions on a whim can be silly and still a good decision. Buying an expensive car on a whim because you think it'll be silly and fun is not a good financial decision.
  4. Be clear: Don't confuse outcomes and decisions. A good financial decision does not mean you will have a good outcome. Great decisions can end up poorly. And poor decisions can turn out well. The outcome does not determine whether the decision was good or not.

    This is the trickiest one on this list. It would seem obvious that the worthiness of a decision is directly tied to the outcome. But there are so many other factors between the decision and the outcome that they should not be confused for one another.

Live these steps and you’ll make good financial decisions. Not every time, but more often than not.

Be deliberate, be structured, be silly & be clear.

FPA member Nathan Gehring, CFP®, provides financial planning services to young individuals and couples at My First Financial Planner, a service of Conceptual Investment Advisors, Inc.

Print this page
Find a planner