Let’s buy that house we’ve always wanted and then we can build back up our emergency fund.

Let’s get a bigger luxury SUV and then we can figure out saving more for college.

Let’s figure out how to pay for college first and then we’ll figure out our retirement savings.

Our financial decisions, when made in isolation, often lead to unintended consequences.

And while I’m a card carrying member of team fun, let’s make sure that fun is long-term sustainable! For example...

Buying the house you always wanted once you have a comfortable cash cushion in place means you don’t run up credit card debt the first time something goes wrong.

Driving that bigger luxury SUV is more enjoyable when you’re not stressed out about paying for college because you know you’re saving enough.

And helping your kids pay for college feels better when your retirement plan doesn't require them to become doctors or lawyers so they can help you out financially down the road.

So how can we avoid making financial decisions in isolation that lead to unintended consequences? Try using the independent observer test. Here’s how it works:

1) Introduce an “independent observer” to your financial decision making. 

This imaginary independent observer is someone separate and distinct from you and your partner. The observer helps you both zoom out and look at your bigger picture in an unbiased way as your independent observer doesn’t have a vested interest in the decision being made.

2) What might your independent observer point out? 

Your independent observer helps you slow down and make sure you’re looking at all of the areas of your financial life that might be impacted BEFORE you make any decisions.

3) Would an independent observer agree with your decision?

Would your independent observer, after taking into account all of the financial and emotional components involved, agree with your choice? And if not, are you willing to move forward regardless?

At the end of the day, we’re the ones that live with the consequences – positive and negative – of our own financial decisions. The independent observer test can help us avoid unintended consequences, make better decisions, and create more sustainable enjoyment in our lives.

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