Solutions to Make Better Decisions with Your Money

The Secret to Financial Success

Thinking Long Term: The Secret to Financial Success by Sally Herigstad | TaxACT

Do you think about your future? Where you’ll be (want to be) in 5, 10 or 15 years?

The biggest secret to financial success – or success in any endeavor – is to think farther ahead than most people do.

To illustrate how that works, think about kids growing up. They gradually become able to understand longer and longer periods of time. That’s a primary mark of maturity.

A baby only comprehends this second. A child can start to talk about next Christmas. It dawns on teenagers that they will eventually be adults on their own. Although they can’t imagine getting really old – like over 30.

Financial maturity works the same.

A financially naïve person thinks about getting through today, or this month. Cash in the pocket, or credit available on a card? Everything’s good.

Immature people don’t spend much time thinking about long-term consequences of their decisions. Wise people do.

Excuses for not thinking long-term

People give all kinds of reasons why they can’t or don’t need to plan farther ahead financially.

If they’re doing well, some people couldn’t be bothered with thinking farther ahead.

Unfortunately, “doing well” for too many Americans mean their credit cards still work and they can at least make the minimum payments.

They may not have an emergency fund, they may not be getting ready for retirement, but as long as they can go on nice vacations and drive a decent car, if it’s not broken, why fix it?

When trouble strikes; for example, when they lose their jobs, families break up, or all that spending just catches up with them, they may find it almost impossible to think long term.

It may seem there’s no point, when they’re too busy trying to survive day to day. It’s hard enough just to keep the lights turned on – it may seem cruel to try to make them look farther ahead.

Regardless of your situation, however, if you want long-term success, you need to start thinking farther and farther ahead and planning accordingly.

5 decisions made easier by thinking long-term

Thinking long-term can affect decisions you make every day. For example:

Thinking Long Term: The Secret to Financial Success. Short-Term vs. Long-Term Thinking | TaxACT

Tips for thinking long-term

When you see a daily, weekly, or monthly cost, always figure how much it costs per year. For example, a $24 gym membership is $288 per year. If you use it, great. If not, you could have bought used exercise equipment for that much or less.

Look for the total cost of an installment plan. Don’t be fooled by the monthly payment. Some ads don’t even tell you how many months it will take to pay something off.

Think, “What will I wish I had done, five years from now?” That’s probably what you should do.

When you sign up for a monthly service, such as an Internet subscription, do you automatically calculate how much it will cost you per year?

Photo credit: Nicholas_T via photopin cc

Subscribe to the TaxACT blog and take ownership of your finances!




Take the conversation further...
We'd love to know your thoughts on this article. Meet us over on Facebook, Google+ or Twitter
About Sally Herigstad

Sally Herigstad is a certified public accountant and personal finance columnist and author of Help! I Can't Pay My Bills, Surviving a Financial Crisis (St. Martin's Griffin). She writes regularly at CreditCards.com, Bankrate.com, Interest.com, RedPlum, and MSN Money. She is an experienced speaker and a member of Toastmasters International. Follow Sally on Twitter.