I read a book the oth­er day that asked the ques­tion: “What is the best finan­cial deci­sion you have ever made?”

I began to think about how this needs to be asked more by finan­cial plan­ners.  Clients don’t read­i­ly think of it, but if you ask it as home­work, the clients will begin to ana­lyze the choic­es, both good and bad, they have made.  It isn’t meant to be an exer­cise in beat­ing your­self up, but rather illu­mi­nat­ing hind­sight in choic­es for the pur­pos­es of learn­ing and set­ting a path for­ward.

Kiplinger is one of my favorite news sources.  A lot of times they cov­er the quan­ti­ta­tive side of per­son­al finance; how­ev­er, they do a won­der­ful job cov­er­ing the qual­i­ta­tive side of per­son­al finance. A recent arti­cle, by Bob Niedt, enti­tled “Finan­cial Deci­sion You Will Regret For­ev­er,” dis­cuss­es what peo­ple have thought were bad deci­sions. I can’t say these are always bad deci­sions, but it is impor­tant to ask your­self: “Is the best finan­cial deci­sion I can make giv­en my life plan?”

Bor­row­ing from your 401(k):  It isn’t what the funds are used for nec­es­sar­i­ly, but how you pay it back.  A lot of peo­ple who take the loans, reduce. or stop alto­geth­er, new con­tri­bu­tions to the account.  That’s not to say it is the worst deci­sion, but is it the best for me based on how I want to live giv­en my finan­cial plan.  Some peo­ple have bor­rowed from their 401(k) to help them fund their suc­cess­ful start-up.

Claim­ing Social Secu­ri­ty Ear­ly: Claim­ing ear­ly means a low­er pay­out than at full-retire­ment age, or lat­er.  For each addi­tion­al year you wait, the pay­ment increas­es by 8%.  When you take Social Secu­ri­ty depends on your par­tic­u­lar sit­u­a­tion.  It may make sense to start with­drawals ear­li­er maybe because the mar­ket is down, there is a health scare, etc.

Pay­ing the Min­i­mum on Cred­it Cards: Pay­ing the min­i­mum bare­ly puts a dent in the prin­ci­pal owed.  Some­times that is your only option, though.  A smarter way of maybe pay­ing down the cred­it card using a small pay­ment is find­ing a card that has a 0% bal­ance trans­fer and start mak­ing the same lev­el pay­ment to the new card.

Putting off Sav­ing for Retire­ment: The num­bers do a lot of the talk­ing.  Save and invest ear­ly to posi­tion your­self for an eas­i­er tran­si­tion to retire­ment plan­ning.  If you have debt that you feel suf­fo­cat­ed by, you may feel bet­ter about pay­ing off rather than sav­ing. For mak­ing your life work, it may not make sense to save each and every year from your 20s through your 70s.  Find the right bal­ance that works for you as you might have to take some years off sav­ing to pay down debt.

Bankrolling Your Kids: The com­mon phrase always res­onates: “You can­not bor­row for your retire­ment liv­ing.”  Although it may be a pri­or­i­ty to pro­vide for your kids, it is more impor­tant to pro­vide for your­self first.  If you can’t take care of your­self, how do you intend to take care of your kids?  It might be impor­tant to you that your kids have a start­up fund.  Find­ing out how fund­ing your kid impacts you is very impor­tant and could be a worth­while ven­ture if your kid is the next Bill Gates, Steve Jobs, etc.

Pass­ing up Pro­fes­sion­al Advice when You Need It:  This is impor­tant for more than just finance.  Ever try mess­ing around in your yard with­out call­ing the util­i­ties ser­vice line? For most peo­ple, it isn’t worth guess­ing where the gas/electrical lines are. Why would you mess around with your finan­cial life with­out con­sult­ing an expert?  There is plen­ty of infor­ma­tion avail­able for every­one to make an informed deci­sion, but not every pro­fes­sion­al is com­plete­ly unbi­ased.  Using pro­fes­sion­al advice from some­one who has an incen­tive to put you in a spe­cif­ic prod­uct might be the time you pass up their advice.  When­ev­er pos­si­ble, try to take pro­fes­sion­al advice from those you trust and have your best inter­ests at heart.

Avoid­ing The Stock Mar­ket: You may hate risk, but you take it every day.  It sur­pris­es me when I hear peo­ple say they want to keep their mon­ey safe and the stock mar­ket is not safe, yet they dri­ve their cars for 30–40 min­utes every day to work.  Sta­tis­ti­cal­ly dri­ving is more dead­ly than sky­div­ing.  It is all about per­ceived risk.  Over the long-term, the mar­ket is usu­al­ly up.  Instead of think­ing of the val­ue of your account, think of the cash flows your port­fo­lio can pro­vide.  How­ev­er, if you invest in your­self, that is an easy way of avoid­ing the stock mar­ket.  It is much riski­er than the stock mar­ket, but it can be much more reward­ing.

Quit­ting School: This could be great for a vari­ety of rea­sons, includ­ing real­iz­ing a trade is more valu­able to you.  I would argue that quit­ting learn­ing is much more detri­men­tal.  Anec­do­tal­ly, I know enough peo­ple who only grad­u­at­ed from high school, but con­tin­u­al­ly learned their pro­fes­sion were far bet­ter off than those who grad­u­at­ed col­lege and stopped learn­ing in his/her job.

Finan­cial deci­sions should always be viewed through the lens of what you want your life to look like, not just finan­cial­ly.  If not, any deci­sion you make could cer­tain­ly be one you regret. So any­time you are mak­ing a finan­cial deci­sion, be sure to ask your­self: “Is this the best finan­cial deci­sion I can make based on my life plan?”