stop and Assess
The first step in managing debt, a business crisis, or making any major financial decision, which involves pausing to gather information rather than reacting emotionally.
What is "stop and assess"?
the practice of giving a goal a specific deadline or time-frame
time-bound
What is setting your financial goals?
What is setting your financial goals?
The crucial first step in any sound financial decision-making process is defining this.
The crucial first step in any sound financial decision-making process is to clearly define these.
What are your goals/objectives?
When you give up a shorter-term desire to gain something else more substantial in the future, you're accepting this type of cost.
What is opportunity cost?
Two key factors to identify and evaluate during the "assess" phase, after establishing your current financial situation.
What are your needs versus your wants, and your goals?
This is the "M" in the SMART acronym, focusing on quantifying your objectives so progress can be tracked.
What is measurable?
What is personal financial data (or net worth information)
What is personal financial data (or net worth information)
This is the information you must gather about your current financial situation, including your assets and liabilities, to make an informed decision.
This is the second step in the PACED decision-making model, after defining the problem and before selecting criteria.
What is listing alternatives?
This key financial principle states that a dollar available today is worth more than the same dollar received in the future due to its potential earning capacity.
What is the time value of money?
This type of ongoing financial review, recommended at least once a year, helps you monitor your progress and make necessary adjustments to your plan.
What is a regular check-up or review?
The "A" in SMART stands for this characteristic, ensuring the goal is practical and within reach given available resources.
What is achievable (or attainable/actionable)?
What is looking into different sources (or considering multiple options)
When gathering information on potential choices, a wise person does this to avoid relying on a single, potentially biased, source.
Deciding whether a potential purchase is a "need" versus a "want" is the foundation of this smart financial decision-making tip.
What is understanding needs vs. wants?
The most important aspect of financial planning for young people is this, which can have the greatest impact on their wealth accumulation over a lifetime.
What is career choice?
In the "stop" phase, this type of thinking helps separate important information from distractions, preventing impulsive decisions based on panic or bias.
What is strategic, rational, or deliberate thinking?
This "R" element of goal setting requires the goal to align with your broader values or objectives, making it worthwhile to pursue
What is relevant?
What is research (or due diligence)
This term refers to the process of gathering and evaluating information about a product, service, or investment to ensure it aligns with your needs and goals.
Before making a big purchase, the number one thing most people do to evaluate their options is to do this, often by comparing features and pricing.
What is research?
Making a large purchase, like a house or a car, is generally the only time financial experts recommend taking on this type of debt.
What is "good" debt (or a necessary large purchase)?
When assessing your options, it's crucial to identify and evaluate both the potential gains and these related downsides.
What are risks and returns (or opportunity costs)?
Before creating a plan, it's crucial to identify these potential obstacles, which could be internal (like procrastination) or external.
What are potential obstacles (or roadblocks)?
What is risk tolerance?
When considering an investment, gathering information about its historical performance and various asset types is a way to practice this strategy to minimize loss.
If you're struggling with two close choices, creating a list of these for each option can help you decide; the one with the longest "pro" list often wins.
What are pros and cons?
This is the ideal time to begin saving for retirement to maximize the effects of compound interest
What is as soon as possible (or right now/early)?