“What should I do with my money? Should I buy Bitcoin?; Which shares should I buy?”
Since it is products that are directly marketed to us, naturally our minds can ruminate on whether we should buy them.
But with millions of financial products out there that can consume a lot of precious mental bandwidth.
And choosing unsuitable products can cost us money, cause us to miss out on affording life experiences that really matter, and create stress.
Follow this sequence to make better money decisions, faster.
Money decisions become clearer and quicker when we start with why.
If you’re deciding on a product, stop and reflect ‘which important element of my life is this product facilitating?’
Or if it’s a sum of money reflect ‘what is the purpose I want this money to serve in my life?’
- Is it to provide security in the case of misfortune?
- Is it to eventually spend on an item or experience I really want?
- Is it to enable me to retire on my terms one day?
Beware of the common mistake to define the purpose as “I want to invest to make and have more money”. That is a means to the end lifestyle purpose.
Once you know the purpose of each portion of your money it filters in (and out) suitable strategies including suitable categories of products.
For example, if the portion of money would be used in an emergency then volatile investments such as shares and crypto may be inappropriate. Similarly, illiquid investments like property may be inappropriate.
As another example, when the purpose of the money is to fund your eventual retirement then it may be appropriate to consider various superannuation contribution strategies.
Once you know the right strategy for the portion of money you can narrow your research efforts to only brands of products within the strategy.
For example, only research the ETFs (Exchange Traded Funds) that fit your strategic risk profile.
This is financial planning
The ultimate purpose of all of your money decisions is to afford a life you love – to be financially flourishing.
Financial planning is when you apply the above process holistically to all of your money decisions, incorporating your preferences along the way. On your own that can be overwhelming, so use a licenced financial planner as a guide on your journey.