Panelists at ‘Kitchen Table Economics,’ a Washington Post Live discussion on personal finance, which was held on April 16. (Jeffrey MacMillan/The Washington Post)

When it comes to your money, what you decide today can affect your finances for years to come.

And yet many people don’t decide anything.

In a survey that looked at household savings, only about half of Americans admitted they had good savings habits, according to America Saves, managed by the Consumer Federation of America, and the American Savings Education Council, managed by Employee Benefit Research Institute.

In another study conducted by the National Foundation for Credit Counseling, 64 percent of Americans said they didn’t have enough savings to cover a $1,000 unplanned expense. To raise the money, 17 percent of respondents said they would have to borrow it from friends or family. Another 17 percent said they would skip paying another bill to cover the expense.

Recently, Washington Post Live brought together a panel of experts to discuss “Kitchen Table Economics.” The advice was useful: Save for emergencies, cut your debt, invest for retirement, shop smarter. But one expert hit on something I’ve been concerned about for years.

Michelle Singletary discusses a mentorship program that “handholds” community members in teaching them about personal finance. (WashingtonPostLive Production/Washington Post Live)

“There is a vein of research that suggests, well, people don’t make very good decisions,” said Nick Bourke, director of the Safe Small-Dollar Loans Research Project for the Pew Charitable Trusts. “They’re not optimal financial decision-makers.”

In making big and even small financial decisions, they fail to weigh all the choices and consequences. Many people would rather have $100 today than $150 a year from now, Bourke said.

“Everybody makes mistakes,” he said. “Everybody is a non-optimal financial decision-maker at one point or another, predictably, systematically.”

Using himself as an example, Bourke said he recently spent too much eating out on his credit card. But he could recover from that mistake because he has savings. Many people don’t have the money to withstand the consequences and shocks of a bad decision, he said.

I regularly work with people who are trying to recover from financial disasters brought on by poor decision-making. I once had a person tell me she decided to buy a car on her lunch break. She was tired of her clunker. She hadn’t done any planning or research. The purchase was not optimal. She couldn’t afford the payments.

One young woman quit her job and decided to withdraw her 401(k) money. She didn’t fully understand the penalties of the early withdrawal. She was shocked when the IRS sent her a tax bill for several thousand dollars.

One of the keys to a better financial life and security is to become better at making decisions. But how does that happen?

One step at a time. So let’s go through eight steps to smart money decisions I use for the people I counsel.

1 Define the decision. What are you trying to accomplish? State it clearly.

2 What’s the need or want behind the decision? Why do you think you have to make this decision now?

3 What’s non-negotiable? What things are you not willing to compromise on if you decide to take action on this decision? If you are buying a car and you have a large family, the vehicle has to accommodate at least seven passengers. Or, your commute to work is far and you need a car that gets good gas mileage.

4 Identify alternatives. Have you carefully considered all the options? Yes, your older car is increasingly in need of repairs. But if you can plan the repairs so you aren’t stranded, it’s still probably cheaper than buying another car. Is public transportation an option? Do you absolutely need a car?

5 Assess the various alternatives. Once you’ve identified them, examine each one carefully. Don’t rule anything out. Often bad decisions are made because you settle on a particular solution before considering your options.

6 What’s the cost and can you afford it? Calculate what each alternative would cost. If it’s buying a used or new car, consider everything, including gas mileage, insurance premiums and reliability/repair records for the vehicle you’re thinking about buying.

7 Take a step back. Give yourself time to think about the decision. Be patient! If it’s the right decision today, it will be right tomorrow. If the car you wanted has been sold, there will always be another one.

8 Make a decision. If you can say with certainty that you have followed the first seven steps, then proceed with confidence knowing you did all you could. Don’t look back with regret.

If you apply a systematic way of looking at financial decisions, you can avoid a lot of the bad ones that come back to haunt you.

Readers may write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or singletarym@ Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read previous Color of Money columns, go to