How to Use a Pros and Cons List For Big Financial Decisions

pros and cons list

We face choices every day. Making choices that affect your finances can feel especially daunting. When you're dealing with financial decisions, using a pros and cons list can help you stay objective and logical, allowing you to make decisions based on facts, rather than emotions.

How does using a pros and cons list work?

Making a list of pros and cons is both simple and powerful. Think of everything—big, small, and everything in between—that will be affected by your decision. If there would be a positive result, you add it to the pros column. If something negative would happen, it goes with the cons.

The process allows you to look at each factor and viewpoint individually. This prevents the overwhelm and potential “analysis paralysis” from staring a big decision in the eye. Once you have all the pros written down, you simply cross-check them against the cons. Whichever side of the list has more items, is likely your winner.

How to use a pros and cons list for your finances specifically

Most of us have strong emotional attachments to money, often in combination with negative mindsets. The best way to dig into your pros and cons is to ask yourself deep questions. The most important part is to be honest with yourself. Remember, no one has to see your list but you, unless you’re deciding with a partner.

You should have money goals. Each decision you make affects your progress toward those goals. Even if it seems nominal at the time, your financial choices add up to create your progress or backslides. Leaning on a list of pros and cons keeps you in check.

Examples of financial decisions a list of pros and cons can help with

A pros and cons list can be helpful with any money matter, but it’s especially effective for those monumental decisions. Don’t feel stuck or guilty as you decide how to save, spend, or invest your money. Instead, think about all the good or bad that could come from your decision, then commit.

Let’s work through some scenarios where a pros and cons list can help you evaluate all the advantages and disadvantages that come with making major financial decisions. Of course, your case will be unique, but these examples will help you see the lists in action.

Buying a first home

Deciding to buy your first home is potentially the single biggest moment in your financial journey. Buying a house comes with a huge price tag. Because of this, take plenty of time to mull over the reasons for and against getting that mortgage.

Potential pros:

  • You earn equity.
  • There’s potential for resale where you could recoup your money, or maybe even make a profit.
  • Ownership means living by your own standards and style, rather than a landlord’s.

Potential cons:

  • You pay much more in interest than in the value of the home.
  • Property values vary based on factors outside your control.
  • You’re responsible for upkeep and repairs, which can add up quickly and unexpectedly.

Opening a new credit card

Credit can feel like a double-edged sword. We’re told not to rely on it, but we need a good credit score to be eligible for loans and other financing. Before you decide to open a new credit card, weigh the advantages and disadvantages.

Potential pros:

  • You can earn cashback or other rewards on purchases you’d be making anyway.
  • Using credit and paying it off on time builds your credit.
  • Credit cards are safer and often more convenient than cash.

Potential cons:

  • You can rack up debt quickly if you don’t pay off your balance each month.
  • Most credit cards come with high-interest rates.
  • If you aren’t good at controlling impulse spending, using a credit card can feel like “fake money,” so the consequences aren’t felt until after the damage is already done.

Starting a business

Entrepreneurship absolutely isn’t for everyone. While the benefits of starting and owning a business are many, so are the drawbacks.

Potential pros:

  • As your own boss, you will likely have much more freedom.
  • Your earning potential isn’t capped by your employer.
  • You can expand and grow yourself and your business based on your interests, skills, and passions, rather than being confined by a job description or company structure.

Potential cons:

  • Your income can become very unpredictable.
  • You bear much more responsibility as a business owner, including financially, legally, emotionally, and mentally.
  • The learning curve is steep and the upfront investment may be out of your reach.

Making a splurge purchase

While saving and paying down debt should be a top priority, you should also enjoy your money, right? Sometimes you deserve a splurge. Think about the positives and negatives before dishing out that dough.

Potential pros:

  • If you’ve built up a rainy day fund, you’ve already put money aside with the intention of spending it.
  • Sometimes material goods or high ticket services do make your life easier, save you time, or help you feel more confident. In these cases, that expense could definitely be worth it and might even have a return on your investment.

Potential cons:

  • Making a big purchase out of the blue could derail your budget and throw off your debt repayment plans.
  • Most of what you buy depreciates, or loses value, over time. That momentary joy might come with longer-term regret.

Start deciding

Whether the decision you’re making surrounds a big opportunity or a looming problem, the last thing you want to do is decide based on fear. It’s important to note that a list of pros and cons is a great tool, but you also need to listen to your gut. Stay clear-headed and reflective as you look at your list.

Sometimes winner-takes-all—when the pluses outweigh the minuses, the list decides for you. But there are cases where you may think of more advantages, but there’s one disadvantage that’s a non-negotiable for you. That deal-breaker makes the decision for you. A pros and cons list is about getting out of your head so that you can make the best choices for you, your finances, and the life you want to lead.

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