How to Make Better Financial decisions

One Question that I am asked a lot, is “How do I make better financial decisions?”

Firstly, there is no quick fix!

Financial decisions are complex.

Often we assess the success of a financial decision years later. A staggering 80% of our decisions come from emotional and instinctive thoughts. We are good at making decisions like what we want to drink which is driven by emotion (such as I know I want some water because I am thirsty). You really need to look at how to make decisions based on your emotions and your logic. Often we do not allow ourselves enough time to consider a financial decision either because we rush the decision or because we avoid making it! The number of times a client says to me that they did not understand something (like pensions or making a Will) and therefore just avoided dealing with it!

Don’t focus on instant gratification

Often, we are too focused on buying things rather than creating memories through using our money on experiences. How we spend our money and or time often says something about what we value in life.

How we spend our money = what we value in life

CAtherine Morgan

A better decision would be one where it is not made in the heat of the moment. Through conversation and reflection, you can come up with a set of rules for yourself. A manifesto so to speak, to help you with your financial decisions. For example, one of mine is “I must never make a financial decision in the week.” This is because I have no time for this in my life during the week. If I want to make a purchase online, I add it to my basket and return to it days later when my mind is clear. You do not want to make a highly emotionally driven decision, particularly a big one, without any reflection time.

Also ask yourself if you could be delegating these decisions. You may be somebody who is more confident if you are holding the reins, for others you may wish to delegate to a professional.

Top tips

  1. Give every £ a Job to do! Every pound should relate to your own personal money motivations.  Forget “goals” as these are often assume an end moment in time. Instead think ‘priorities’ or ‘best guess’ situations. What can you see yourself doing in the future? If you are still unsure, start with protecting your current lifestyle and work from there.
  2. Think about your money priorities– When you make a purchase think about how this contributes towards your values and your goals. If over-spending is a habit, think about “Is spending now more important than your future goals.
  3. Timing Is Everything
    – Don’t discuss money with your partner/children/friends if you are Hungry, Angry, Lonely or Tired! Research shows that talking about money in a comfy chair or with food is the best time as you are at your most relaxed. (Coffee shop and cake springs to mind!) Money concerns is the number one cause of all divorces – so think about when is the best time to discuss.
  4. Enjoy Money! If you are an over-spender, challenge yourself to live off say £10 for a week. If you are a saver, allow yourself time to enjoy your money.
  5. Do think about the “what if” scenario – Prepare for the worst because you don’t want something to happen that you are not in control of – A change of health for example to quash your value or your priorities.
  6. Talk Money – share your past, face your money fears

Challenge yourself

Ask yourself the following questions:

  • Do you have a history of saving or a history of bad debts?
  • Are you used to saving up for what you want or are you spontaneous with your money?
  • What would it take for you to feel financially secure?
  • What frightens you about Money?
  • What is your first memory of Money?

7. Slow Down – Give yourself time to make decisions but don’t procrastinate. You have a choice, don’t feel pressurised.

8. Create yourself a ‘Money Manifesto’ – A set of rules to help you make a financial decision – For example, never make a financial decision in the week when you may be rushing around or too emotionally driven. Delegate to a professional adviser to help you make decisions.

9. Be organised – Hold a Joint account for all your bills and a sole account for what is left over for you to spend. Set up a “Christmas” account and a “Car” account and a “Tax” account and allocate a few pounds to each pot each month. Actually call the bank and ask them to add a title to your account! Then you are not scraping around for money when you need it.

10. Plan – Keep track of everything your are spending for a month – Begin your money management journey. Try Monzo or Starling Bank – These fantastic apps help you track your spending and categorise your spending!

Check out our related blog about Starling Bank – Is this the best bank account ever here


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