The big four financial decisions

Every decision you make has a knock-on effect. When it comes to your personal finances, four big decisions will have a large effect on your financial future:

Your (and your children’s) education

The higher the level of your education, the greater your earnings potential will be. Earning more means you will be able to adequately provide for your future, whilst also enjoying your lifestyle now. Greater levels of education and earnings may also entitle you to better rates on insurance and banking products.

This also extends to financial education. The more you know about money, the better. It will lead to better financial decision making and ultimately better long-term financial outcomes.

Your children’s education is also of vital importance. You want to provide the best you can without sacrificing your own future. Private school fees, a luxury home and luxury vehicles often don’t leave much money for your future.

The highest possible level of education for your kids, without completely breaking the bank, increases their chances of future success and becoming financially independent sooner. This can also be supercharged by ensuring they are well-educated on personal finances and making good decisions from their first ever pay cheque.

Your health

As you get older your health tends to decline.

This could mean increased health care costs, which are very expensive and increasing aggressively each year.

If you take care of yourself as much as possible now, it will lead to better health outcomes in future. You will likely live longer and generally be healthier. You will have to spend less on medicine, doctors’ visits, surgery/hospitalisation and physical rehabilitation.

Any personal insurance you take out is also likely to be cheaper, with fewer exclusions.

You don’t have to do anything dramatic. Eating well, sleeping enough and regular exercise (strength/resistance training and cardio) is the simplest and most effective way to stay healthy long term.

Where you live

Something my mother always said to me that really resonated was, “Live in the humblest home in the best neighbourhood”.

The more expensive the home you buy, the greater the costs to own it, run it and maintain it.

Buying an older home or a “fixer upper” could lead to a large financial outlay over time to bring it closer to your personal vision and to bring it to a point where you could eventually resell it should you want to. The longer you leave those renovations, the more expensive they will be.

It would be better to buy a home that does not require major surgery to bring it to a state where you are happy with it.

To my mind the best neighbourhood means one with good security, nearby amenities (shops, schools, hospitals et al) and proximity to work.

The further you must travel to essential amenities and work, the more you will have to spend on transport and maintaining your vehicle.

How you get around

Alongside housing, transport is likely one of the most expensive items in your basket. The cost of the vehicle you buy will have a direct impact on your savings (putting down a deposit or buying the car outright) and your monthly cash flow if you must finance it. Add insurance, servicing and maintenance to this and the cost of transport can be a real whopper.

The more functional and least expensive your transportation is, the better.

Keep it relatively humble if you can. It will give you more money to spend on other things you value more, that will have a more positive long-term impact on your life - such as providing for your future goals and your and your children’s education.

Also, changing cars more frequently than every five years is a recipe for wealth destruction. Think more along the lines of every 10 years. That way you can extract the maximum value from your outlay on the car.

If you can focus on your and your children’s education, stay healthy, live in the humblest home in the best neighbourhood and keep your costs of transport down: I’m certain that your long-term financial outcomes will be supercharged.