Making Poor Financial Decisions? Here’s How to Understand Why

Everyone makes flawed financial decisions at some point.

In my 20s, I unwittingly attempted to make every money mistake in the book. Sometimes I wasn’t even aware I was — like the time I used a credit card advance for the down payment on my condo!

In other instances, like overspending, it was due to a belief that I was “bad with money.” Sound familiar?

Here’s what changed for me

I developed an awareness that 1) being broke constantly was not how life was supposed to be, 2) I was worthy of more and better, and 3) if I dug down deep enough I might find the root cause.

Like most of the challenges life had thrown at me, I would figure this one out too. But I had to do a lot of self-reflecting to surface the underlying thoughts and behaviors that needed to change.

There are many self-reflection methods, but the 5 Whys is my favorite because it’s easy and effective.

Peeling the onion layers on your financial decisions

1. Start by identifying one money issue you want to focus on. Example: My credit cards are maxed out again.
2. Ask yourself “why?” and let the answer surface. Why did you make that particular financial decision? Don’t judge it. Example: Because as soon as I pay them down, I immediately spend on them again.
3. Now ask “why?” again. Example: Because I don’t have enough cash and I have to use credit until my next payday.
4. Ask “why?” again. Example: Because my spending is out of control.
5. Another “why?”. Example: Because I love to shop.
6. Ask another “why?” and as many as required until you arrive at the feeling, belief, or thought driving your behavior. Example: I feel in control when I’m spending money.

Once you know the root of your behaviors and why you are making certain financial decisions, the process of resetting and rebuilding can commence.

Need help with that part? Check out my course, Wealth Begins Within, where you can learn how to transform your relationship with money and build vision-driven financial goals.