This is part five of my eight-part series on how you can beat the banks at their game and get yourself out of debt.
Do you tend to live on impulse? There is an element of romanticism to acting on a whim or a fancy. But in my professional experience as a financial adviser, I find that those who make drastic changes based on their emotions and desires struggle the most financially.
We all have made a hasty decision at some point. However, if you continually make major decisions without considering all your options or getting professional advice, you can set your financial position back years – even decades.
Let me give you an example.
I met my clients Joe and Maria in 1995. They had a couple of children, worked full time and had bought a modest home in Sydney. Although money was tight, they were able to make extra payments on their mortgage to pay it off more quickly.
Five years later, they called to let me know they had sold their home and were moving to Italy. “Joe wants to go back to Italy to be with his family,” Maria said. “We think we can do better financially there.”
Joe and Maria used the money from the sale of their home to buy a pizza shop and start a new life, in a new country, with their young children and furniture in tow.
Four years later, I received another call from Maria. “Italy didn’t work out,” she said. “Italy has changed and my husband didn’t like it. The pizza shop didn’t make us much money. So we’re back in Sydney with nothing but the furniture we took with us.”
But Joe and Maria had returned to a changed Sydney. What could have got them a three-bedroom house in the suburbs five years earlier could now not even afford them a one-bedroom apartment. Instead, they had to rent. A couple of years later, they bought a pizza shop, believing it would be the “cash cow” that would enable them to re-enter the property market.
But the shop struggled. Money was tight. Owning a home in Sydney became a pipe dream for Joe and Maria.
If they had consulted me before taking the leap and moving to Italy, I would have advised them to go to Italy, but keep their house in Sydney and rent it out. Take the time to figure out if they really liked Italy. If, in a couple of years, they still wanted to stay, then they could have sold their house in Sydney. That way, they wouldn’t have burnt their bridges when things didn’t work out.
So how can you avoid making hasty decisions that will cost you in the long term?
1. Think before you jump. Whatever you do, don’t simply jump! Wait and have a think about it.
2. Seek financial advice. You may think you will save money by not consulting an accountant or financial adviser, but you’ll end up paying for it – and more – in other ways.
3. Consider “what if” scenarios. What will happen if something doesn’t work out? How much will it cost you? What will you do?
4. Have a responsible vision. You can be financially conscientious and still go with your dream. The key is to research as much as possible. What you think sounds great may be very different from reality, so arm yourself with information.
5. Don’t beat yourself up. No one is perfect. We all fall into the trap of temptation and haste from time to time. But make sure you learn from your mistakes and don’t let your emotions dictate your life or your finances.
Download the first three chapters here: http://www.moneyintelligence.com.au/free-stuff/
Stay tuned next week for Part 6: Live by Pareto’s 80/20 Rule.
Susan Wahhab —CPA, SMSF Specialist, Entrepreneur, Working Mum, Small Business Supporter— is Australia’s leading Financial Strategist and Money Mentor. Susan is the founder and managing director of Accounting and Financial Services firm Winner Partnership Pty Ltdwww.winnerpartnership.com
Susan is the author of the transformational and practical book Money Intelligence®. Susan is passionate about helping people achieve financial liberation. At the age of six, she witnessed how her money-savvy mum (whom she calls the money manager) joined forces with her dad (whom she refers to as the money maker) to save the family business from bankruptcy and become financially free. Susan truly believes that people can become financially liberated by developing a healthy relationship with money. Learn more about being money intelligentwww.moneyintelligence.com.au