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The large implications of small financial decisions



You may not know it yet, but small decisions can actually cost you big. Economist Alfred Khan said so himself in his 1966 essay The Tyranny of Small Decisions. Khan wrote how well-meaning humans can make a series of small, inconsequential decisions that can lead to unintended and unwanted implications—whether it’s beneficial or harmful.

For example, spending at least P120 a day on milk tea may not be a big deal to you, but if you compute your spending in a year, you’ll discover that you already spent P43,800. Imagine having that amount of money and choosing to spend it on a drink. Now imagine if you instead saved that P120. Small decision: large implication.

On the positive side, remember the 20 percent rule where you take a measly 20 percent from your salary and deposit it to your savings? Imagine the amount of savings you have right now if you started practicing this rule a year ago non-stop. The small act of taking a pinch of your hard work can actually become beneficial for you in the long run. Small decision: large implication.

Making small financial decisions carelessly can catch up on you overtime. It may not be today or tomorrow, but eventually, it will. That’s why as early as now, you should be wary about the choices you make on a daily basis, no matter how insignificant they seem to be. Here are some tips to help you make your small decisions work to your advantage.

Reevaluate your values
Have you ever asked yourself what your plan is five years from now? Are you planning to buy a home? Maybe start a family or a business? Reevaluate your financial goals and always refer to them every time you get the urge to buy something. Will this item help you achieve your goals in the long run? If not, then it’s best not to waste your money on trivial things.

Use more cash than credit
Technology even made it harder for everyone as cash nowadays are slowly becoming obsolete. After all, it’s easier to spend money that you don’t have. Try going back to cash instead and see how your shopping behavior changes. Basically, you’ll be more inclined to care for every peso you spend when it came directly from your wallet. That’s just how it is.

Track your daily spendings
On the flip side, you can also use technology to help you make better financial decisions. Download apps like Money Lover and Wally to help you track the things you buy. Doing this will remind you of your financial limits. And if you want to go old school, a financial journal where you can write down your daily budget and spending will never get old.

Give yourself some time
The problem with small decisions is that they are often made quickly and with haste. Before you decide to buy something out of budget, give yourself some time to go back and review your financial goals. If you felt the urge to buy something, sleep on it or wait for a week or two. That will give you enough time to consider the consequences of your purchase.

Make decisions the night before
To avoid decision fatigue, make some small decisions the night before. An overload of choices like what to eat, what to wear, what to listen to, and others can stress your mind, leaving you vulnerable to urges that tell you to buy that expensive watch. Free your mind of these things so you can have enough willpower to follow through with your financial plans.

Just remember, any decision you make will have consequences. It’s up to you to make a series of small decisions that will help you reach your goals in life quicker. If you think about it, everything will start with this one question: Do you want to have a better future? Hopefully, your answer to that question will help you make better financial decisions.

Ricky Publico is a content writer at Moneymax. Save money on car insurance, credit cards, and loans when you compare and apply at www.moneymax.ph! Visit their website to know more.

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