I recently read Ask It: The Question That Will Revolutionize How You Make Decisions by Andy Stanley. In it Stanley discusses what is the most important question you can ask before making any decision. The answer might surprise you. I highly recommend this book as I truly believe it could be life changing.
The most important question
So what is the most important question to ask yourself when making a decision?
Many people ask does it sound like fun or is it what I want to do? We probably all instinctively know those aren’t good questions.
“Is it popular?” drives many decisions especially among young people, but simply doing what everyone else is doing is usually a recipe for disaster.
Given that Stanley is a pastor, you might think that the question that should drive our decisions is “Is it the right thing to do?”. That’s what I expected the answer to be. While that is a better question, it isn’t the best question.
So what is the best question?
Is it the wise thing to do?
This is the best question because often there are things in life that are not necessarily wrong. But they clearly are not wise. For example, if you are married it may not be wrong to have a business dinner after work with a member of the opposite sex. But is it wise? Not really. Many affairs have started with seemingly innocent actions. Does that mean if you go to that dinner you will have an affair? Of course not, but the wise choice would be to not even take a step in that direction.
Choosing financial wisdom
While this question has relevance for many areas of our lives, I think it is a critical question as we consider how we will spend our money.
Often our financial situations are not based on clearly defined rights and wrongs. In fact sometimes our choices change over the course of our lifetime. A choice that would be a very poor financial decision when we are just getting started might be no problem when we are in our 60’s and nearing retirement. Wisdom helps us determine what we should do. Let’s consider some examples.
Driving a new car
I have a about an 80 mile rounds trip commute to work each day. There was a time in my life that would have meant buying a new car with all the options. Since I spend so much time in the car, I would have convinced myself I “deserve” a nice car to drive.
But, consider that in driving 25,000+ miles a year I am basically destroying whatever vehicle I drive. So is it wise to destroy a $30,000 vehicle? Or would the wise decision be to find a reliable low-mileage older used vehicle that still has a lot of life left in it? Two years ago I paid cash for a 1998 Toyota Camry. It’s comfortable, reliable, and I hope to get at least another 3 to 4 years of service out of it. I would much rather destroy a $5,000 car as opposed to a $30,000 car.
I would submit that given how quickly new cars lose their value that it is rarely a wise choice to buy a new vehicle, but especially if you are a road warrior you do not want to be continually destroying new vehicles. You might as well stop by the ATM on the way home from work and get a couple of twenties to toss out the window. Effectively that is what you are doing
Student loans have become so common that young people sign on the dotted line without even thinking twice. After all student loan debt is good debt right?
First, attending college is not the same as getting a degree. In 2012, the National Center for Education Statistics reported that the 6 year graduation rate was only 59%. I have seen stats that indicate only 19% of college freshman will actually get their degree in 4 years.
So that means that 4 out of every 10 college freshmen will not graduate with a degree and of those that do most will take more than 4 years, meaning even more loans. But the problem is 100% of those loans will need to be repaid regardless of whether the student has a degree. So now the young person gets the pleasure of all the payments without the salary that would have come with the degree.
Or perhaps just as bad are the cases where students run up thousands of dollars in debt to get a degree in a field that pays a very low salary. Or the arrival of children or other life changes make that career not nearly as attractive. Ask the mom dropping her baby off at day care and crying all the way to work if those student loans were a wise choice.
I am not opposed to education. I think education is almost a requirement in our society. But the wise choice is to do as much as possible to limit the amount you borrow to as little as possible, ideally $0. Can’t be done? I don’t agree. There are ways to get that education without a mountain of debt. Join the military. Work and save. Apply for every scholarship in site. Find a company to work for that has a tuition reimbursement program. It can be done and your 40-year-old self-will be very grateful you sacrificed to win.
Buying a house when you have debt and no savings
This is another mistake I made when I was young. I bought my first home when I was 23 and a year out of college. Thought renting was a waste of money. Much “wiser” to own my own home.
Except when you own a home and the roof leaks you have to fix it. If you are renting you call the landlord. There are far more expenses associated with owning a home than just the monthly mortgage payment.
I want you to buy a home. For most people home ownership is a wise financial move. However, there is nothing wrong with renting for a time, until you build a solid financial base by paying off your debts and building an emergency fund. If you wait to buy a home until you are in a solid financial position that purchase will be a blessing and not a curse.
Not considering my fiance’s views on money
If you are considering marriage one of the most important conversations you must have is a discussion on your views of money. The #1 cause of divorce is disagreements over money. And yet often this area gets glossed over in pre-marriage counseling. After all we are in love. It will all work out. Or worse I can change him or her after we are married.
That doesn’t mean you and your future spouse have to be identical in every fashion. But a wise person will make sure that you have an understanding of how your future spouse views money and how you will handle money together after you are married.
Most people would agree that carrying credit card debt from one month to the next is unwise. But what about those who say they pay their card every month and they use it to get the rewards?
If you truly pay it off every month and you never buy anything with plastic that you wouldn’t have bought with cash, then maybe you are the one that has the system beat. In reality though, many studies have shown that people spend less when they spend with cash because you feel the purchase in a way that you don’t feel when you swipe a card.
While your intentions to pay it off each month may be good, the reality is a month comes when you have some unexpected expenses. You promise you’ll make up for it next month. Then something else comes up and something else and one day you wake up with $5,000 on your card and wonder what happened.
This is a prime example of making the wise choice. There is nothing wrong with making a purchase with a credit card. It is not a “sin” to buy using credit. But I believe the wise choice is to simply not play those games.
The “wisdom” of good debt
We have already touched on student loans and why I think it is a mistake to consider them as good debt. Mortgages are another type of debt that is often considered good debt. In fact there is at least one prominent financial guru who recommends you keep as large a mortgage as possible and keep it for as long as possible. The truth is he makes a fairly convincing case of why this is “wise”.
As a Christian though I have to decide do I accept the Bible as truth or not. Proverbs 22:7 says “The borrower is a slave to the lender.” Note that it doesn’t say unless you are borrowing on an item that goes up in value and then it may be ok. That is just one of many scriptures that discourage debt.
Making wise choices
It is all about stopping before you make that next financial decision and considering what is the wise choice for me today. Andy says that in all of our decisions we should consider “In light of my past experience, current circumstances, and future hopes and dreams, what is the wise thing for me to do?” When you consider your choices in that context you will make different decisions.
So, what if you aren’t sure what the wise thing to do is? Check back in next week for part 2 of this post and I’ll talk about some important ways you can learn to make wiser choices.