It seems like an easy task to make a decision. You run your life, so you can decide to make any decisions on your own and nobody would question you.
But when it comes to making any financial decision, you need to be sure you are making the right decisions. Making financial decisions can either turn out good or bad which could contribute to your life positively or negatively respectively.
To avoid making bad financial decisions you need to ask yourself these questions.
1. What are your goals?
You need to ask yourself what are the goals you want to achieve. Which includes both your short-term goals and long-term goals.
Asking yourself what your goals and aspirations are would make it easier to know which is more important to work on.
2. What is your motivation?
If your motive is only based on sheer emotion, then it is not a good reason to take that financial decision.
Are you doing it just to get back at someone, selfish reasons? If you have no positive drive for it, then it won't be wise to take that financial decision.
3. Do you have other options?
Ask yourself if there are other options you could think of before making any financial decisions. Consider other options. Without thinking about any other option can lead to financial mistakes. Probably your decision could add to your debt, which you really should avoid. So think thoroughly for other ways to achieve your financial goals.
If you have no other options and you are sure that you have no other options, then you can decide to use your only options.
4. What are the benefits?
What would be the gain and benefit of your financial decision? Would there be lots of benefit from it?
Some benefits are always obvious, while some are not always clear. Make sure you are sure of the benefits that can come out of your decision.
If there are no benefits or the gains from the decisions you are about to make are not much. Then you should have a re-think about your financial decision.
5. What will be the opportunity cost?
You need to think hard about what you would be sacrificing for the choice made.
It all comes at a cost, and it doesn't necessarily have to be monetary. You really need to think deeply about what you might likely give up.
6. What do you stand to lose?
Think about the worst possible outcomes. What’s the worst thing that can happen? Can you handle the risk involved and live with it?
Can you recover from the loss? You need to factor this when making a financial decision. Take some time to think about it.
Make sure you have really thought about your financial decision before carrying it out. And also come up with a good plan to execute it out.