Six Steps to Making Good Decisions in Tough Times

I heard a staggering statistic the other day about the number of homes that are going into foreclosure each day. In addition, people are losing their jobs as many businesses experience a decline in revenues and are struggling to keep their doors open. It’s certain that most of us are feeling the effects of this tougher economy. What we don’t yet know is how deep and how long we will experience these economic tough times.

Financial stress can either paralyze us into taking no action when we should or cause us to make poor, impulsive decisions. When we’re in a flourishing economy, it’s so much easier to recover from any bad decisions we might make. However, when things are tough, there’s not as much room for error and a misstep will take a longer time to recover from financially. Over my years of experience in working with clients, I’ve come up with these six steps that will help you make better financial decisions in tough times.

Step 1: Know what’s truly important.
The first step is to take the time to know what’s most important to you. This is more difficult when you’re feeling financial stress. Ask yourself the question, “What makes my life richer?” For example, spending time with your children or your spouse, and staying healthy might be most important to you. Once you have clarity on what’s most important, it’s easier to make financial decisions that keep you in alignment with your life values.

Step 2: Be proactive about your spending choices.
The second step to making good decisions in a tough economy is to be proactive about how you spend your money. Look for ways to cut household expenses and before you buy, ask yourself, “Is this purchase really necessary?” In addition, check to see if any loans or credit cards can be refinanced or consolidated to lower your monthly payments and interest rates.

If you are self employed and experiencing a business slow-down, look for ways to reduce your overhead. Many business owners who are renting space have been able to re-negotiate a lesser rent. You’ll also want to explore creative ways of finding and keep new customers while keeping your current ones happy with your products or services.

Step 3: Seek input from professionals.
The third step to making good decisions in a tight economy is to research the options and the consequences of major financial decisions. The more research you do, the better outcome you’ll have. Seek input from people who have more information and experience than you. Also, check into the possible tax or legal consequences of your decision. This is particularly important if you’re considering a decision on the disposition of property such as a short sale, deed in lieu of foreclosure, or going into foreclosure.