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Make Better Financial Decisions by Asking These Three Strategic Questions

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make better financial decisions

Frugality is not about saving money.

Sure, saving money is a big part of living frugally, but if your end goal is to save money, then you’re missing the point.

The real purpose of frugality is to manage your money wisely so you can live the good life. The true goal is to make good financial decisions so that your money is working in your best interest. Saving money is just part of the journey – it’s not the destination.

Juggling financial priorities can be hard. You have bills to pay, stuff you want to buy, and the future that you should be saving for. And limited funds to cover it all.

So how should you prioritise your money management?

There are three simple questions to ask yourself (and one important tactic to put into play) that will help you to make better financial decisions.



“Should I buy this?”

Most of us don’t question our spending decisions before we buy, let alone ask ourselves the right question.

The money is usually out of our hands and in the till before we’ve given a second thought.

And then we peer into our wallets at the end of the week (or look at our credit card statement) and wonder where all our money has gone.

This is so common, there’s even a name for it. Economists call it BUYER’S REMORSE. It’s the regret we feel for having spent our money unwisely.

The thing is, our brains are wired for instant gratification. It’s a caveman survival tactic. See food, eat now for tomorrow there may be none. And there’s nothing like shopping to give you an immediate hit of gratification. Marketers know this and use that hard-wired trait against us. Research shows that we spend emotionally and then rationalise our spending afterwards.

While there’s nothing wrong with a bit of instant gratification (we all need to let our hair down and enjoy life!), when it ruins your finances or gets in the way of you reaching your greater goals, then it’s a problem.

So the SOLUTION is to avoid buyer’s remorse by short-circuiting the emotional high of instant gratification and rationalising before we part with our hard-earned cash. And to do that we need a STOP SIGNAL that forces us to pause and step away from the buying process to ask ourselves: Should I buy this?


The best way to develop a habit is to engineer your environment for success. In the case of spending, the answer is to reduce the amount of time you spend shopping and to remove your credit cards from your wallet.

In the time it takes to drive home and get your money, you’re giving yourself time to ask yourself whether you need to buy at all.

Creating a wish list is also a good idea. Instead of automatically buying, you write your potential purchases down instead. Again, this gives you time to consider them. Tip: Use Evernote on your phone and photograph what you want to buy.


“Should I use my money for X or should I use it for Y?”

You’re walking through the shops when you spot them.


(Not a shoe person? Insert the object of your desire here. For me, it’s books. I’m sure I keep Amazon in business. My daughter, however, is very much a shoe girl.)

You are halfway to the register with the shoes firmly tucked under your arm when you get savvy and ask yourself the golden question: “should I buy this?”

And you realise the answer is no.

You don’t need another pair of shoes right at this moment. Not this pair anyway.

So you’ve just saved yourself some money.

Great, right?

Or is it?

The question: “should I buy this?” stops us from spending money on autopilot, but it doesn’t help us make better financial decisions.

Because what are you saving that money for?

Unless you’re Bill Gates, you have limited amounts of money. And unlimited wants. There’s stuff out there you don’t even know you want yet, but it will tempt you in the future.

The real problem of buying those fabulous shoes isn’t the impulse spending. It’s the other things you could have done with that money.

This is known as OPPORTUNITY COST. It’s the indirect cost of a decision. The stuff you miss out on when you choose one option over another.

In the case of our shoes, maybe that money could have gone to a house deposit. Or a holiday.

The question then isn’t should I buy this, but: “Should I use my money for X or should I use it for Y?”

By framing your spending in terms of opportunity cost, you can start to make better financial decisions. Frugality isn’t about deprivation. It’s about WISE SPENDING.

Now here’s the crucial takeaway that people get wrong when they think about frugal living. Those shoes, they might bring you real joy. You might look at the opportunity cost and decide that the benefits of owning the shoes outweigh the costs.

And for that reason, you should absolutely go ahead and buy those shoes!

The goal is to SPEND MINDFULLY and prioritise your spending, not to hoard money and never spend it.


“Will this financial decision lead to the good life?”

Just say your best friend asks you to a music festival, and it’s going to cost you $100.

And then your boss calls and offers you a day of overtime on the same day (because isn’t that how it always works?!) and you’ll earn an extra $100.

A quick cost-benefit analysis shows the opportunity cost of going to the festival is $200. Not only is it going to cost you $100 to attend, but you also have the indirect cost of not taking the opportunity to work the overtime and earn $100.

From an economic perspective, the so-called rational choice would be to work the overtime.

Doesn’t that thought just suck the joy out of life?

There are two problems with this rational evaluation:

  1. Humans are not as rational as we would like to think we are; and
  2. There’s more to life than money!

And thank goodness!

Economic theory is all well and good, but we need to temper it with a healthy dose of humanity.


Let’s look at the indirect costs of not going out with your friend:

  1. You aren’t fostering your relationship
  2. You’re not having fun
  3. You aren’t de-stressing
  4. You’re not having new experiences and learning new things
  5. You’re not out meeting new people

All of these ‘costs’ are vital to fostering happiness and wellbeing. They are five pretty good reasons for not taking the ‘rational’ option.

On the other hand, if you are totally stressed-out because you don’t have enough money to cover upcoming bills, then working the overtime would be the best option. 

This blog is all about living the good life. Part of that is making good decisions with your money. And the only way to make good decisions is to take a holistic approach to life.

Just as blindly spending money doesn’t lead to the good life, and neither does blindly saving all your money.

Opportunity cost is a useful tool for making financial decisions, but only if you take into account indirect costs and benefits like happiness and wellbeing.

The ultimate question to ask yourself is: “Will this financial decision lead to the good life?”


So how do you know whether your spending decisions are leading to the best possible life?

The answer is to create YOUR vision of the good life.

  1. What does the good life look like to you?
  2. What makes you happy?
  3. What are your goals?
  4. What are your values?

Write down the answers to these questions (there’s no right and wrong answer, only what’s right for you). They will influence your spending decisions.

When you ask these three questions:

  1. Should I buy this?
  2. Is there something better I should be doing with my money?
  3. Does this support my values, goals and vision of the good life?

You can be assured that you’re making the best financial decisions for you.



There is an easier way, and it’s to CREATE A BUDGET.

Now don’t groan. Budgeting your money doesn’t have to be painful.

A budget makes this whole process easier because you’re not making opportunity cost micro-decisions.

Every. Single. Day.

Instead, when you create a budget, you’re making all your financial decisions just once and in advance.

Science shows we only have a certain capacity for decision-making each day. As the day wears on, we suffer from DECISION FATIGUE and our ability to make decisions erodes. We opt for easier options.

If we use all our brainpower up on micro-decisions, then we don’t have enough to use on matters of real import. That’s why we’re more likely to eat a litre of ice cream at night. It’s also why people like Mark Zuckerberg and President Obama wear the same clothes every day. They don’t want to waste brainpower on unimportant decisions.

A budget is like having a pre-defined wardrobe. Just as you would slip into Monday’s shirt, your spending decisions are all ironed and ready to wear.

What happens now when you see that PERFECT PAIR OF SHOES?

Well, you’ve already assessed your values, goals and the things that make your life good. Maybe you decided that beautiful things make you happy. They’re part of YOUR good life. And because you know that, YOU’VE BUDGETED FOR THEM.

And you can buy them without remorse.

But you don’t want to create any old budget.

You want a budget that is grounded in your vision of the good life and that supports your financial goals. A simple budget that actually works. That manages your money proactively for you without taking up your time fiddling with apps or spreadsheets or tracking expenses.

Frugal living isn’t about deprivation; it’s about making smart money decisions. There’s no point to saving unless it’s to achieve your goals and support your vision of the good life. When we understand this, we can use opportunity cost to evaluate our financial decisions and make choices that lead to that vision.

make better financial decisions


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  1. The great thing is there so many things that are most important to the good life that are completely free. The lie of marketers is that you have to pay up more and more to get it.

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