By Bhuvanaa Shreeram, Co-Founder & Head of Financial Planning, House of Alpha
Have you ever struggled with making important decisions such as:
- How much can you stretch to do the interiors in your dream home?
- What maximum should you spend to get your children admitted to courses of their choice?
- How many guests should you invite for your daughter’s destination wedding?
- Can you afford to take a short career break and try something interesting?
What drives these decisions?
These everyday conundrums have both emotional and financial overhangs. And because most people do not know how to think through the financial aspects of these issues, they base their decisions on emotions. And we know how money decisions made emotionally usually end up?
Some of us have very clear goals and aspirations in our life. While some may not be very sure what we really want. But almost all of us know something that we definitely do not want.
Nobody ever wants to make compromises on their lifestyle. We can’t move to a smaller house or fire the maids or take local transport. Reducing lifestyle is an anathema that most people would want to definitely avoid.
One another thing that nobody wants is to depend on others to maintain their lifestyle. We do not want to be answerable to anyone for our expenses. We want our independence and freedom to do whatever we want with our time and money.
At the same time, most of us do not want to leave behind a lot of money for our children at the cost of having a good life for ourselves. We would like to travel business class, take the grandkids to Disneyland, or actually splurge on doing up the house if we can afford it. We don’t want to think we can’t when we actually can. We just have one chance to live this lifetime, we would like to make the best of it.
Priorities in the Short term and the Long Term
In the short term and on a micro level, top priorities are –
- Catering to the immediate needs of self and family
- Providing the best opportunities for children and loved ones
- Enjoy the good things in life for social reasons and personal comforts
- In the long term and on a larger canvas the two most important and non-negotiable objectives are :
- Maintain the current good lifestyle
- Stay independent and unanswerable
- Live life without regrets
Key to making better financial decisions
The objective of a lifestyle financial planning exercise is just finding this balance.
Some financial decisions are not easily reversible and have a long-term impact. Such as, purchasing a house on loan. Or quitting the job and starting a business.
Before making such decisions, the one question to ask is – “If I do this – will my money last?”
If it will – you have the freedom to go ahead and do it without fear or guilt. If it won’t – you can consider various other options and make decisions now when you still have the time instead of when it is too late.
This is how complex financial decisions can be broken down into easily processable decision bytes.