One Question to Ask Yourself Making Decisions for the Long Term

By Andy Hayes

We’ve talked at length about making SMART financial goals that are aimed at supporting you in the long term.  But how does setting goals translate down in to specific decision making?

Good questions – and I have a question to ask you in return.  Here’s the format to use when you’re reviewing major decisions in a long term view:

Will this matter in __ years?

That’s it.  Let’s unpack this concept with some examples.

Example: Should I buy or rent?

This is a common one – is it better for wealth building to buy a house or still rent an apartment?  Here’s how to use our question:

  • Will this matter in 1 year?   Here, you can look at how much you’ll need for the deposit, and all the money you’ll spend in a year.  But you can also think about all the benefits and comforts of owning a house, vs renting.
  • Will this matter in 5 years?  Now we’re starting to see what happens in a longer term view… maybe you’ll start to see a growth in the value of a home, or maybe this is how long it would take for you to get the deposit.
  • Will this matter in 30 years?  Wow, can you think this far ahead?  You could pay off a mortgage in this amount of time.  What would that look like?  What would that feel like?  This is a timeframe where our ultimate goal planning worksheet can help you pencil out the numbers.

Example: Should I get a job now, or go for an advanced education?

Another common, difficult decision point – and a great scenario where opportunity cost comes into play.  Let’s try using our question format again:

  • Will this matter in 1 year? At this point, your decision is narrowly focused probably on what would be more fun – do you enjoy learning?  Or are you itching to get into the workplace?
  • Will this matter in 5 years? Looking this far out, you start to see a the first impacts of this decision.  Likely, the education is complete, so you can think about what does it truly mean to have that advanced option vs having 5 years of work experience.
  • Will this matter in 30 years? Now we truly see the impact of this decision on your wealth and other opportunities.  Would the advanced degree be worth it in the long term?  If you look this far out, you can really see the answer.

Reviewing your big life decisions in terms of their impact in 1, 5, 15, or 30 years (you can change the numbers as appropriate), you can truly see the long-term benefits and impacts your decisions have.  Most people do not ever think about their decisions in such a wide-reaching perspective, but anything that involves your wealth – or your wealth-earning potential – should be viewed with the long term in mind.

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