Copyright Goodheart-Willcox Co., Inc. 18 Chapter 1 Financial Literacy Basics Systematic Decision-Making When deciding important matters, a systematic or rational decision-making process can help you arrive at the best course of action. Systematic decision- making is a process of choosing a course of action after evaluating available information and weighing the costs and benefits of alternative actions and their consequences. It involves five steps, as shown in Figure 1-2. 1. Define the decision to be made. You need a clear idea of the challenge in order to find the best approach. What is the issue? Perhaps you never have time to exercise. Identifying this problem can lead you to set an achievable goal, such as putting aside an hour each day for exercise. 2. Explore all alternatives. Analyze possible solutions to your problem. If you need to find an hour to exercise, identify and cut back on time killers. Can you free up an hour by limiting your Internet surfing and TV watching? Can you rearrange your schedule to gain time? Is there an after-school activity you can drop, or can you combine some of your activities? 3. Choose the best alternative. After considering all alternatives, decide which one best fits your situation. It may be one alternative or some combination. 4. Act on the decision. Carry out your plan. For example, if you decide to rearrange your schedule, write a plan for the new routine. Follow it for a few days to see how it works. You may need to make some adjustments. If you decide to limit phone time, it may help to tell friends when you will be taking calls and when you will not be available. Find reminders and aids to help you stick to your new schedule. 5. Evaluate the solution or decision. Evaluation is an ongoing process. As you carry out your plan, evaluate your progress toward your intended goal. Is the plan of action working? How can you improve it? The evaluation process can help you stay on track and make better future decisions. Managing Resources Managing personal finances requires that you manage the use of your resources to the best of your ability. Management is the process of organizing and using resources to achieve predetermined objectives. Whether you run a big corporation, an average household, or your own personal affairs, you need Define the decision to be made Explore all alternatives Choose the best alternative Act on the decision Evaluate the solution or decision Steps in the Decision-Making Process Goodheart-Willcox Publisher Figure 1-2 The five steps of the decision- making process can be a helpful tool when making decisions.