Growing up has its perks.

We get to move out of our parents' houses (hopefully). Cookies for dinner is always an option.

For better or worse, we get to take responsibility for our own actions.

That said, becoming an adult isn’t always easy... especially when it comes to money. Life experience, and seeking help from others who have gone through the same financial decisions you need to make, will help you along this important milestone towards adulthood.

One merit badge for adulting is financial responsibility. And if we learned anything growing up, to earn your badge the best bet is to “always be prepared.”

You’re here because you cared enough to seek out information. That’s a great start!

To get you headed in the right direction and stress less, here’s a 5-point checklist for making any financial decision:

State Your Goals

How do you know if you’re on the path toward making responsible financial decisions if you don’t even know where you’re headed?

Knowing what you want from life isn’t always clear when you’re fresh out of college. It doesn’t have to be! You’ve got plenty of time.

However, I’m sure there are certain things you know you’d like to accomplish for yourself. There are steps you can take to feel like more of an adult and to make you feel like you can comfortably support yourself and all that you want to achieve.

Here are five steps to take when looking to set financial goals:

1. Decide what matters to you. It can run the gamut from practical objectives or urgent needs to the big-house-on-a-hill fantasy.
   
2. Prioritize your goals:

• What is within your reach?
• What will take a little planning?
• What will have to go in your long-game playbook?
  

     3. Make SMART goals:

• Simple
• Measurable
• Achievable
• Relevant
• Timely

      4. Set a realistic budget. Compare what you earn each month versus how much you spend. You should also eliminate any bad habits that will keep you from reaching your goals. One common trap for everyone is ordering delivery too often and not cooking at home.
      5. Apply any surplus from your budget toward savings to help you work toward your goals.

While you’re working on determining goals, it’s important to remember not to compare yourself to others.

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Your friends, acquaintances and coworkers may be in a different financial situation than you. Some people you know may have had help from their parents on their tuition and others may have had scholarships. You don’t know their whole story, so it’s unproductive to hold yourself up against other people.

Additionally, your needs and wants may not be the same. Keep your goals true to you.

Here are a few examples of goals that will put you on the path to financial responsibility:

• Living by your aforementioned budget is a great place to start working toward financial responsibility
• Paying off credit card debt
• Giving yourself an emergency fund (and we’re not talking Daft Punk finally announces they’re playing a show … in Paris)
• Starting a retirement fund
• Improving your credit score
• Purchasing a car
• Putting a down payment on a home
• Saving up for your children’s college fund

It’s also a good idea to identify where you want to end up and “reverse engineer” it from there. If you know what the finish line looks like, you can work backward:

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• What is the step right before your completed goal?
• What would you have to accomplish to get to that step?
• Keep working back toward your current financial situation.

Your goals won’t feel insurmountable if you can identify each step in the path towards that goal.

For the purpose of this article, we’ll set a goal of purchasing a car. You know your goal is completed when you’re at the dealership and the salesperson hands you the keys. But what steps does it take to get there?

To have the confidence to purchase a car, you may need good enough credit for financing the car. You’ll also need to be sure that you can fit your monthly car payments into your budget. To help make those monthly payments manageable, you probably want to save up a bit for a down payment.

Let’s look at what else you’ll have to consider while trying to make good financial decisions.

Avoid Making Impulse Buys

We’re all susceptible to an impulse buy from time to time.

Impulse buys are spur-of-the-moment decisions, and they happen to the best of us.

However, learning to pick and choose those splurges and adopting some self-control is a large part of earning some financial responsibility.

First, get in the habit of asking yourself why you want to make the purchase. Determine if it’s a want or a need.

When purchasing a car, you’ll want to weigh a number of factors. Do you only need it to get to work? Does that work require a specific type of car?

Next, avoid making emotional decisions.

"One of the biggest reasons people make bad financial decisions is that they let their emotions get the better of them," says Rob Jupille, president of RTJ Financial Management in Santa Monica, California.

Perhaps you attended an auto show in your area and fell in love with a car. It could have made you feel nostalgic, or maybe you just thought it was cute. But is a VW Bug really going to make sense in a few years if you’re going to start a family? Keep your emotions out of the decision-making process.

Third, do some research.

Check the reviews on Consumer Reports and other sites to evaluate viable alternatives and see if you can save some money with a comparable product.

Here are a few other consumer review sites for you to consider:

• Consult YouTube if watching video is more your speed.
• The Wirecutter is another site that does in-depth research on consumer products.
• AuthorityAdvisor is a review site which focuses more on professional reviews, rather than user reviews.

Also find out what the Kelley Blue Book value of your car if you’re trading it in or considering a used car. You’ll also want to research the advantages of purchasing a used car versus a new one.

Identify similar cars to what you’re looking for and check their list price. Many sites even offer a payment calculator to help you determine whether you can afford the car before going to the dealership.

You may even want to see if it pays to purchase a hybrid or electric car.

Gathering as much information as possible will help give you the confidence to make responsible financial decisions.

Lastly, sleep on it. You might feel differently about a decision after a good night’s sleep.

Consider the Pros and Cons

To make financial decisions with conviction, examine the potential outcomes.

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When weighing the pros and cons, it’s crucial not to get distracted by the “best-case scenario” you’re being presented. One way to do this is by doing scenario analysis. That means you consider potential outcomes in three categories: worst-case, base-case, and best-case.

Let’s frame this with our example of purchasing a car:

• The best-case scenario could be that you get a raise at your job or seek out some additional income. Perhaps refinancing student debt gives you a little more wiggle room in your budget for your car payments.
• The worst-case scenario might be if you lose your job or have a medical or family emergency. Does your current financial situation and budget give you enough to maintain your car payments while you’re looking for new employment?
• The base-case is if everything stays the same with your current budget.

The best-case scenarios will feel good to think about. It’s important to know any potential negative outcomes that may arise, so you can balance them against the best-case ones.

We mentioned leaving emotion out of it. Knowing the list of cons will help you to remain even-keeled.

It’s going to feel good when you’re test driving a car. It’s likely an upgrade over your current vehicle. It may also be your first major purchase as an adult. There can be a lot of emotion wrapped up in that.

That’s why it’s important to sleep on a decision, do your research and know the outcomes. Then, you can easily avoid being distracted by seeing the best-case scenarios through rose-colored glasses.

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For the example of purchasing a car, you need to know how much you can afford to put down and what monthly payments you can fit into your budget.

According to Ronald Montoya, a consumer advice editor for car review and pricing website, edmunds.com, “If you’re just kind of looking at your budget, the general advice we’ve been giving is that your automotive budget should be no more than 20 percent of your take-home pay.”

However, more frugal-minded consumers may want to keep their monthly payments closer to 10 percent of their monthly budget. That means budgeting $300 for a car payment, if you make $3,000 each month.

You should also consider how it will affect the goals toward which you’re working. Will there be a delay in any of your other goals? Is it worth that delay?

Ask for Help

We’re never too old to ask for help.

In fact, most of our parents would relish the opportunity to dole out some advice. They’re usually giving it whether or not you ask, right?

Your parents or family friends may have been in your same shoes. Ask people in your circle of trust for advice.

Sure, there are plenty of great resources available to everyone (and we’ll get to them momentarily), but wouldn’t you prefer to consult someone you already trust who has faced the same decisions you’re currently trying to make?

There’s wisdom to be gleaned from those we know that have learned lessons from making those decisions already. See what savvy advice they can offer from their successes and failures.

Perhaps your friends or family found that they could get better interest rates on auto loans from a Credit Union. Maybe they’ve had a Honda for a decade or more and never had any major issues.

If you exhaust your resources in your inner circle, you can turn to numerous other options.

Apps for Budgeting

• Mint Personal Finance & Money. Tools to manage your money, bills, budget, and credit score.
• You Need a Budget. A personal budgeted software available on any operating system.
• Every Dollar. Another budgeting app for you to try.
• Quicken. Financial management software for your credit cards and other banking, investments, and even retirement savings.
• HomeBudget. One more app to manage finances for every OS.

Blogs

• Frugalwoods. A blog from a family dedicated to frugal living and financial independence, without skimping on the joys in life.
• Millennial Money Man. The site’s creator paid off his debts and quit his job to help others do the same.
• Budgets Are Sexy. A site that seeks to put a fun twist on money management, budgeting, credit cards, retirement and more.

Podcasts

• Stacking Benjamins. An award-winning podcast that looks to put some fun and play into financial literacy.
• So Money. Hosted by Farnoosh Torabi, featuring conversations about money with top business minds, authors, and influencers.
• Money for the Rest of Us. Financial advice “for the rest of us.” Hear from others who have faced similar money and investment decisions as you.

Coworkers

• Peers. Let’s not also forget that while you don’t have to measure yourself against your peers at work, many of them may be in similar financial situations as you. Ask them what they do to make good financial decisions for themselves.
• Employers. Some of your superiors may have built their business from the ground up. To do that, they likely had to gain a good amount of finacial literacy and experience. Ask them what they did.

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Let’s take see how else we can monitor the outcomes of our decisions.

Track Your Results

Remember the ‘M’ part of SMART goal setting?

It’s important to check in with your goals and see how your budget is holding up. Are you still on track?

You’ll be more comfortable making each financial decision you face if you’ve monitored the outcomes of your previous decisions and you know what worked (or didn’t).

For the times it didn’t work, what did you learn from it? Can you avoid that outcome by approaching it differently the next time?

A few months after purchasing a car, are you still able to maintain the budget that you expected? Are you happy with your purchase or did you have some buyer’s remorse? If you had the information you have now, would you make the same purchase?

Analyzing these questions will help you to make smarter decisions moving forward.

Wrapping Up

Nobody is perfect. Sometimes life gets in the way of our goals. If one goal isn’t on track with your timetable, it’s important to know why. Was there an unexpected emergency such as car trouble or a health scare? You can forgive yourself for those.

Did you ever have buyer’s remorse from any purchase? Did you miss a step in the checklist? Perhaps emotions crept in. Maybe you were over-confident in a best-case scenario or your ability to avoid the worst-case one. If you can learn from those mistakes and do better next time, you’re already on a better path.

With this checklist in hand, you’re on your way. Print it out if you need to and pin it near your desk or nightstand.

     ❏ Set goals

     ❏ Avoid impulse buys

     ❏ Weigh the Pros and Cons

     ❏ Seek help when needed

     ❏ Monitor your results

If you’ve checked off every box, you have a better chance of avoiding buyer’s remorse next time around.

You can do it!

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