How to Make Big Financial Decisions

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How to Make Big Financial Decisions

Every day we are making decisions. What are you going to have for breakfast? How are you going to spend your time at work? What time are you going to go to bed? These are decisions we may or may not give much thought to making. Some of our decisions are financial in nature. Do we go out to eat tonight? Should we be putting more in our emergency fund? Should I buy this HVAC unit or that one? It is this last question that I’m walking through as I speak. It’s one of those purchase decisions that all homeowners have to make at some point. You know it’s coming, but you hope it’s not coming soon. I can’t complain. Our current unit made it 14 years, and that’s even a little longer than I thought it would make it. I thought it might be helpful to walk you through the thought process on this larger financial decision in the hope it might help you with your next big financial decision. This isn’t necessarily the right way to do it. But it is one way to do it.

Alright, one really important place to start is a fundamental truth that undergirds almost every financial decision – you can’t have it all. Life is a series of trade-offs; you are taking on one benefit and taking on a cost at the same time. This may be obvious, but I think all of us begin our financial decision making by looking for the best of both worlds. We want something that has all the bells and whistles but doesn’t cost much. You’re not going to find it. Everything has a cost. What we are looking for is to identify those things that matter most to us and then choose the solution that checks the most boxes with a cost we can afford. So, this is the essential place to start. There is no perfect solution. You know this to be true in your own life. There is probably something about your car you would change if you could. Or your house. You might love it, but I’m sure there’s something about it that isn’t quite perfect. This is life on this side of Eden. If we embrace this on the front end of any financial purchase, it will keep us from being down and disillusioned that we can’t have exactly what we want. It will also keep us from spending more than we should, stretching for something that is just not worth the extra cost.

That leads to the second step in our large purchase financial decision making – what can I afford? In other words, what is your budget? This can narrow the list of options quickly. If I can’t afford a certain unit, then there is no reason to consider it, is there? Don’t overbuy. There is only so much money any of us have to work with and the more we pay for one thing the less money we can pay for something else. So set a number that is realistic for your circumstances.

That leads us to the third step in this process – deciding what we value most. If we can’t have it all, what is important for us to have? If I have to choose, what do I want to make sure I choose? Are we looking for the cheapest option that will just get us by? Are there particular benefits that are really important? For my HVAC decision. Energy efficiency is high on the list. We don’t have any plans to move in the foreseeable future, so I want something that will save me money on energy costs over the next many years. But another high priority is potent heat in the winter. When it gets really cold, sometimes heat pumps have trouble keeping up – so I want something that can keep us warm if we’re in the single digits. So those are a couple of my high priorities, and they are actually in conflict with one another. The more energy efficient the unit, generally the more trouble it will have keeping up. So, if I can have my cake and eat it too, which is more important to me? Whether I like it or not, I’m going to have to choose – even if I’m looking for a happy medium. That’s just the way it is.

The fourth step in large purchase financial decision making is research. The larger the purchase, the more research you might want to do. Here’ where a new tool can come in handy – artificial intelligence. It can help you understand industry lingo and terminology and get a more unbiased take on the options you have on the table. Chat GPT does a really good job of being concise – giving you information, but not too much information. It can even tell you whether something seems like a fair price. Chat GPT was also able to take the average temperature in Jackson TN and the average cost of gas and electricity in this part of the country and tell me how long it would take me to recoup my upfront cost on the most energy efficient unit they could offer. I found out it would take 16-18 years. Now we might still be in our house at that time, but whether this unit would still be working then is a big question mark – so the most energy efficient option is not on the table for me anymore. But getting advice from other qualified individuals is also very helpful. Ask them what they bought. Why did they buy it? Are they happy with their decision? Would they do it again? Throughout this research process you should be narrowing your choice to two or three options. Much more than that, and it becomes too complicated. Now in the research phase, everyone must decide how deep they are going to go, because your research has a cost – and it is that of time. Is the extra time going to translate to saving money, and if so, how much? You don’t want to go so far that you arrive at the paralysis of analysis.

The fifth step is to make the decision. You’ve got to be the decider. It is true that some decisions don’t seem to have a good option and you are picking the least bad option on the table – but you must decide. Unnecessary procrastination doesn’t help anyone. Find the option the option that has the most pros you care about and the fewest cons you can live with. Or go with your gut – pick that one that just seems to be the right solution. But once you have enough info (even if it’s not all the info you would like), pull the trigger.

There is one more step to big purchase financial decision making – don’t beat yourself up if you made the wrong decision. Unless there is a return policy, there is nothing you can do if you made the wrong call. See what you can learn from the decision, but look forward rather than dwelling on the past in an unhelpful way. There are lots of unknowns in decision making, and we just have to move forward with the facts we have at the time. We’ll get some things wrong, and we’ll learn from them. But the more times you go through this process, the better equipped you’ll be for the next financial decision.

We help people with financial decisions all the time. And we’ll outline the pros and cons for you – even if it doesn’t benefit us. We will be absolutely honest about any financial question you lob our way. Whether it’s asking whether to finance your home for 15 years or 30 years or whether to pay off debt or save for the future, our financial insight is where we shine. Start your financial conversation today by visiting Foundationbank.org. We also hope you will subscribe to this podcast in your favorite podcast app and share it on social media. Until our next episode, God bless you.

-President Chad P. Wilson, CFP

Today’s episode of “Money Matters” was written and recorded by President Chad P. Wilson of Foundation Bank/McKenzie Banking Company on April 22, 2025. This episode does not constitute financial advice. Please consult a financial professional to discuss your specific needs. Any rates mentioned are subject to change and are accurate as of the recording date. Foundation Bank/MBC is an Equal Housing Lender, Member FDIC.