Financial decision is one of the most important decisions that you take in life. It affects, directly or indirectly, every other decision. It won’t be an exaggeration to say that materialization of all other decisions depends upon this. Irrespective of what you do, how much you earn, relationship status, or age, it’s important to take prudent decisions guided by facts and reality, not by emotions.
Here are some key questions with deep analysis that you need to ask yourself or your family member while making any important financial decisions in life.
Table of Contents
Am I buying something out of need or desire?
Need and Desire – there is a fine line between the two and while making a financial decision you have to understand it well. Are you going to purchase something out of pure need or desire? Groceries, books for kids, clothes, hospital, and utility bills – can you pause them? Now, think of decisions: planning to get married, go on a vacation, have kids, buying a house or a car are desires.
For a satisfactory life, taking care of both types of requirements – need and desire – is important, but at the right time with the right financial backup other side you can go with Payday Loans Las Vegas. You have little control over expenses triggered by needs, but the second one is well within your control. So, has that right time come? Or, do you have the bank balance supporting these expenses?
What is my current net worth?
Do some math when taking some major financial decisions that may take a significant share of your earning. Calculate your assets and liabilities. You can sit together with your family to have a correct estimate of the household net worth. The exercise measures your capability to make crucial financial decisions like buying a home. Banks may support you for your good credit score, but there is a catch. Always, bank on what you have. Go with a mortgage option, when you have exhausted all other means as the EMI takes a considerable amount of your income and most of the amount goes into compensating the interest part alone. Try to keep the mortgage amount as low as possible.
How the decision will impact my future budget or planning?
A financial decision may trigger a recurring expense or become a source ofregular income, or it may simply do not affect your budget at all. For example, buying a property or car after some down payment can lead to a recurring expense – EMI. It can also be a source of income – you may rent your property or car. Some investments may not give you instant results, but they pay off. For example, investment in health and education. Some investment like in furnishing contributes to the aesthetics of your home, but stay idle. Assess the ROI or significance of your decision, and do the right thing.
How well am I prepared to handle emergencies in life?
Save something for your rainy days – this is something that you have been taught since childhood, and it’s not without a purpose. Life is unpredictable. What could be a better example to understand this than the current pandemic? Do you have adequate funds to respond to any emergency needs in life? The amount of emergency funds depends upon the number of dependent members, your lifestyle, the city or place you reside in, age, and so on. Before taking any major financial decisions, you must create some emergency funds as that will safeguard your other investments. Despite all, if you get stuck in a bad situation and borrowing fund is the only way forward, choose your lender wisely by comparing available options at Instant Payday NV.
How resilient is my financial condition?
Resilience is the bounce-back capability of any individual, family, or organization. It varies significantly depending upon the income, savings, access to affordable credit, and existing debt, among other factors. When you take any move in life that affects your bank balance, existing income, or momentum of passive income generation, you should assess the resilience factor. It takes time to build resilience. The earlier you start, the better it is. Remember, Rome was not built in a day.
Do I have a diversified investment portfolio?
Do not put all eggs in one basket. It’s a timeless piece of advice. Consider investing with multiple stocks, cryptos, or other securities. Investing in rental properties is a good option as it creates a recurring source of passive income. If it’s affordable, you should do it.With diversification, you can compensate for the loss incurred with one or other non-performing investment.
Hope you found the information useful. Comment your thoughts!