8 Tips to Help You Make a Major Financial Decision

by Ryan Guina

Everyone will be faced with a major financial decisions at some point in his/her life. It could be buying a house, buying a car, accepting a job offer, hiring a lawyer, accountant, or other professional, etc.

Major financial decisions can be difficult to make, and more importantly, can have a long lasting impact on your financial health. Before making a major financial  decision, be sure to take your time and make sure you are making the best decision for you and your family. Here are some tips that may help you make eliminate the noise and make the best decision for your situation.

Making a major financial decision

1. Listen to your gut. If it doesn’t feel right at the first glance, then it may be a good idea to pass. Was the car salesman overbearing or did he change the topic when you asked a question about the car’s accident history? Did the financial planner you met with seem concerned about you and your financial interests, or did he give you the hard sell on a high priced mutual fund? A gut check is valuable because it can serve as your first line of defense and help you quickly eliminate some options from consideration.

2. Do your research. Using your first impression can help you quickly eliminate some options, but not all options. The examples I gave above helped me avoid buying a clunker and avoid using a broker who was more interested in racking up fees than making me money. Listening to my instincts helped save me money, but it didn’t put a car in my driveway or help me set up a financial plan. For that I had to continue my research.

3. List pros and cons. Once you have your options narrowed down, it’s time to take a closer look and examine the pros and cons. This is a great option for buying a physical item, such as a house or car. But it can apply to other situations as well, including evaluating a job offer, saving, investing, paying off debt, etc.

4. Communicate. Communication is especially important if you are married or make joint financial decisions. An example of this is my parents, who once bought a couch neither one of them liked, but they bought because they thought the other person liked it. I think I need to amend the article.

5. Sleep on it. Give it a day… or a week… or a month. It’s very rare that you need to make a major financial decision at a moment’s notice. You should typically give a proportionate amount of time to the size of the decision. For example, I usually wait a day or two before buying something over $100. But I take more time to do research for a larger purchase or financial decision. For example, my wife and I are looking at buying a new car, and I imagine it will take us a good month or so of research. A house can, and probably should, take longer.

6. Go with what you know. All things being equal, go with the situation you are familiar with. Buying a car is a good example. For instance, last week I asked, would you buy a Toyota?, in response to the recent recall issues they have experienced. I have owned 3 Toyotas in my life, and my family members have also owned several. After doing the research, I think Toyotas are still great vehicles and offer good value. So if all things are pretty much equal, I would buy a Toyota because I am familiar with their vehicles. The same thing goes with buying electronics and other big ticket items.

7. There is no perfect answer. Voltaire said, “The perfect is the enemy of the good.” You can spend a life time going over the various situations and possibilities, but that won’t necessarily get you closer to the perfect answer. In fact, the closer you get to perfection, the more difficult it is to obtain – sort of like the law of diminishing returns. The short of it is this: there often isn’t a perfect answer. Sometimes you just have to make a decision and roll with it.

8. Trust yourself to make the right decision. You’ve gotten yourself this far. Now it’s time to trust yourself to take action and make the right decision.

Do you have any tips for making major financial decisions?

Published or updated May 11, 2010.
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{ 10 comments… read them below or add one }

1 basicmoneytips

I agree with most of the points, but the one I like the most is 4, sleep on it. Especially in the USA, we have become a now society – everything needs to happen on our schedule. Waiting a day, or a week might dispell some of the emotion out of the decision. Then if you still feel the same way, make the purchase.


2 Kyle C.

I agree with the last comment. Sleeping on it can make a world of difference. I know when I get the bug to buy something if I sleep on it for a few days I can really think about whether or not that purchase is something I can live with for the rest of my life. Taking a step back and looking at the big picture is a great way to make the decision.


3 Jenna

myfinancialobjectives beat me to it. I would suggest talking it over with family and friends you trust. (On top of doing research). Sometimes they know you better than yourself and can help remind you of things you might have forgotten.


4 myfinancialobjectives

I think one thing to stress on is to communicate. Talk with not only your spouse, but ask friends who you know are knowledgeable in the subject matter, or just a reliable friend. I think that getting a second opinion can be one of the best things you can do.


5 Money Smarts

I think you missed one – ” make a decision based completely on your feelings, and regret it later on”.

Ok, maybe not.

I’ve found the point above that works best for me is to sleep on it. I’ve found that by giving myself time to think about a decision, research it and just mull it over that I end up making a much better decision.


6 K.C.

As a corollary to the “sleep on it” suggestion, I would add: Don’t ever make a decision at a sales presentation, unless the decision is a firm no. The presentation is designed to create an emotional buying environment. Be firm and tell the salesperson you will get back to them. They will protest because they know that once the spell is broken, you are likely, highly likely, not to make the purchase. Too bad for them. Stick to your guns and refuse to make a purchase at that time. If it’s a good deal then, it will be a good deal later. As was suggested, sleep on it.


7 Ryan

Great tip, K.C.!

The same thing goes for those “sales” parties like Pampered Chef, Tupperware, candle parties, etc. Sure, the items are high quality, but you can usually find something elsewhere of comparable quality but a substantially lower price. But a lot of people feel obligated to purchase items because their friend is hosting the party. There is nothing wrong with supporting your friend. But make sure you are only buying something you can use, only what you need, and only if it is a reasonable price.


8 Squirrelers

I like this article. Big financial decisions or life decisions shouldn’t be taken lightly. I think its important to take a hybrid approach: some emotional, some analytical.

The latter, analytical, revolves around crunching the numbers and being objective. There is something to be said for knowing the true facts of a situation, assessing it accurately.

The former, emotional, comes into play when you listen to your gut. We just have to feel good about what we are doing, knowing its the right thing. If you have slept on it gained some perspective, but still feel uneasy – then, you may not want to take that financial action.


9 Joe Plemon

Thank you for a timely article. My wife and I recently made a major financial decision (to partner with our son in flipping a house). Because our decision has already been made – we have already bought the house – I read this with trepidation, wondering if we missed something in our decision process. But I am glad to report that we pretty much did all of the things on your list. I like 1. Listen to your gut and 8. Trust yourself to make the right decision. They are similar bookends to your list. But my favorite might be 7. There is no perfect answer.

At this point, for us, we need to trust that we made the best (not perfect) decision we could make with the knowledge we had. This post gives me peace and confidence as we go forward. Thanks again.


10 Ryan

Glad to hear it, Joe. Flipping a house is a big investment, and one I would be nervous about as well. But most reward entails some form of risk. I hope this one works out well for you and your family! 🙂


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