When you are at crossroads in life, facing tough choices, how do you decide which direction to go into? Out of two or more options to choose from, which one should you pick up? Is one a better choice or it just looks like that? Does it appear to be a good choice today, but which may lead to regret later?
Many of these questions are difficult to answer. Often, we do not know how to assess the data, in fact we may not know which is relevant data and where do we get it from. Examples of some such choices are:
- Can I leave my job to pursue my hobby / interest?
- Can I upgrade my vehicle?
- Can I buy my own house?
- Should I repay the loan now that I have got the annual bonus?
- Can we have a second child?
- Can I send my child abroad for higher studies?
- Can I take sabbatical from the job to study further?
These are important questions. One may face some of these at some stage in life.
These could be turning points in life. There are financial implications behind many such tough decisions. Very often, we are unsure about the consequences of the choices we have to make.
The uncertainty with respect to the outcome makes it difficult to decide and some people go by the default choice (continuing with the job, for example) or with popular opinion (either what others are doing or what others tell us to do). Decisions taken under such circumstances may turn out to be mediocre or compromises.
There is a better way to take such decisions. We may call the process as “informed decision making”.
Financial planning is a process that helps in this matter.
Data collection is the first step in this process. This data helps one assess the situation and understand the possibilities. One is also able to prioritise among various objectives and allocate resources effectively.
At various stages in life, it makes immense sense to check one’s financial plan to be able to take informed decisions.