People say do not think about money. It is true that if you only think about making more money, then you will become shallow in your thinking.

None of the successful entrepreneurs or businessmen started with deciding how much money to make. They were just passionate about changing the world or offering a product or service to help people.

However the part of Personal Finance which requires a good mindset development is the Financial Decision Making.

Good decision making is a rare skill in today’s world. The variables and the consequences of any decision we make are numerous. Hence sometimes we make a hasty decision only to regret later or get stuck in analysis paralysis.

Let us see a good framework to make decisions on personal finance.

The framework is a very simple 4 step process. It starts from looking at your present or past situation to your future goals and planning your action items.

If you follow this 4 step process for all your financial (and maybe life) decisions, you will neither be rushing nor get stuck in making good decisions.

• Analyze the metrics – The Past
• Develop your goals – The Future
• Have an action plan – The Present
• Develop a growth mindset – The Growth

Analyze the metrics – The Past

Knowing where you are and a good idea of the starting point is the best way to start a decision making process.

Whenever you are about to make a big financial decision, always start from taking a stock of your current financial situation.

This gives a baseline for the decision to be made. Looking at your financial metrics will show you the strengths and weaknesses in your finances. This is the first step in doing the what-if analysis for your finances.

Develop a goal – The Future

Start with the End in mind. This is the most effective way to plan for a Financial goal.

Any financial decision should have a clear end in sight. For example, if you are thinking of buying a home, visualize yourself as how you would feel or how your life will be in the new home. Keeping this end in mind helps you backtrack from there to the present to develop a solid decision and plan.

This step makes the decision making process more real. Now you know your current position, your target, and is aiming to fire.

Have an Action Plan – The Present

After the last step, the SMART planning will show you what you need to do consistently.

This consistent habit or activity will become your plan to achieve your goal or take the right financial decision.

This step causes you to take the right action towards the decision. Since it is backed by the current position and the end in mind, the steps you take will be much rational.

Develop a growth mindset – The Growth

Finally by the last step, you would have made the decision or working towards it.

Having a growth oriented or positive mindset makes the decision making so much easier. It also helps in situations where things may not go as planned.

If you follow these four steps in every major financial decision, you will neither regret nor get stuck in analysis paralysis.

Conclusion

This is the 4 step process I use in my Financial Coaching to help my clients make such Financial Transformations in their lives.

Email info@startyourfinancesright.com if you want to know more.