Monday, April 13, 2009

Make The Hard Decision

Tip #116 - Make The Hard Decision. When life throws choices at you, as it does almost everyday, you need to make decisions – chocolate or vanilla, big or small, luxurious or basic? Chocolate and vanilla is an easy one – go with the one you like better. Big versus small? That one’s a bit tougher. It’s so tempting to go with the big one – the bigger house, the bigger diamond, and the bigger television. But the consequences of the bigger one make it so much harder. Bigger generally costs more money and maybe that money would be better spent elsewhere or saved. Luxurious or basic? Hmm…that one is an even harder choice. Again, it is so easy to be sucked into the amenities of luxury – the plush bed at a fancy hotel, the leather seats of a high-end sports car, the marble tile in an upscale home. But again, the luxurious choice comes at a cost.

When do you hold off on the extra expense of the bigger item or the fancier space? When you are making the hard decision – the decision to put away money today for uncertainties tomorrow, the decision to delay your gratification until you can really afford it, the decision to start small and work your way up to big. The less expensive choice is often the responsible one.

It is so tempting to get what you want now – the big home with the granite countertops, the five-star hotel with valet service, and the sports car with heated seats instead of the 50-year old home with the peeling wallpaper, the 3-star hotel with no view, and the basic model of a used car. I know that it’s not always easy to choose The Best Western hotel when you would like to stay at the Ritz. It’s not easy to pick laminate counters when you see granite all around you. It’s not easy to pick the Hyundai when you are dazzled by a Lexus.

But by making the harder decision now, you will have more freedom to do what you want at a later time. By not spending money on items that you cannot really afford, you are saving for a future of uncertainty or for the freedom to do what you want when you are older. Make the tough decision now and you won’t regret it later - there will come a time when you will be able to buy that Lexus without guilt or to retire while you are young enough to enjoy it. This doesn’t mean that you cannot enjoy things today or that you cannot ever go “all out” for special occasions. As long as you have money put away and aren’t spending every last dollar you own for “things” or experiences, then it is fine to do so. But you know when you are buying something that you cannot really afford. Stopping yourself from buying it is a tough decision to make. But you can do it.

In Real Life – I am where I am today because I often made the tough decisions. First of all, when I say “where I am today” I mean that I am not in debt; I feel comfortable with my finances in today’s down-spiraling economy, and I am not scrambling about wondering how I will pay for the water heater if it breaks. It does not mean that I have my own empire, in case anyone had any misconceptions.

Now that I have that cleared that up, I will share with you my experience. I had been taught growing up that I need to keep some money in the bank. It was supposed to be put there for a rainy day. So when the mortgage company told us that we qualified for a $300,000-plus mortgage, I didn’t listen. I didn’t want to be enslaved to a large mortgage payment. So instead of deciding to buy the 4-bedroom colonial like the one I grew up in, we bought a 3-bedroom ranch house. That was a hard decision. When several friends in my neighborhood did $40,000 kitchen remodels, I redid our outdated kitchen into a 1950’s diner complete with black and white vinyl tile floor for a total cost of $1,000. That was a hard decision. When others around me shopped at retail stores for their children, I went to yard sales and thrift stores. That was a hard decision. (I realize these aren’t “hard decisions” compared to decisions made by starving people, enslaved people, sick people and others. I am using this term in context of personal finance.)

But today when so many around me are struggling because they made poor spending decisions in the past, I am fairly comfortable with where we are now. If my husband loses his job, we won’t be struggling to make the house payments for quite a while. I am not paying big dollars to heat a large home that sits empty all day because I am at work so I can pay for. My hard decisions in the past have paid off to make my life easier today. That doesn’t mean I didn’t ever do extravagant things or buy good-quality items. I chose a “spa” hotel for my honeymoon, but I don’t choose it for my yearly vacation. I chose a nice wood swing set for our backyard because it will last long and get good use. In general, though, I have always made the less-expensive decision that allowed me some freedom - with my time or by having extra money. And because of that, it has actually made my hard decisions much easier to make.

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