Posts Tagged ‘Personal Finance’

We buy things every day. From family homes to new shoes.  It is a part of life however no one likes to get ripped off or buy something they don´t ultimately need.  So in order to lower your chances of making a bad decision ask yourself these simple questions when you are just about to buy.

If you find that you answer negatively to a few or more of the following questions then you should think more about whether you need to buy it.  If you answer all questions positively then it is safe to proceed.

LOOK FOR RED FLAGS

THE PRODUCT

Can you see it? Can you touch it? Does it work? Could it be damaged without you knowing?  Is it a fake?

THE SELLER – WHAT IS IN IT FOR THEM?

A big question you should always ask.  Could this make them bias as to the information they are giving you?  Do they appear trustworthy? Are there any testimonials or reviews?  What is the likelihood that they deliver top quality products? (difference between a street seller, market seller, internet seller, branded high-street store).

THE SITUATION

How do you feel?  Are you in a notorious tourist market? Are you starving at the supermarket? Are you emotion today and shopping for shopping´s sake?

PUT IN CONTEXT

COMPARISONS

Do you have comparisons? Do you have any direct comparisons?  Comparatively is it high quality or good value?  Proceed with extreme caution if you have no comparisons or go and find some comparisons to check the value, price, quality and suitability.

How does it compare to the others? Would you say this is exactly what you are looking for or is this the best option available at the time? Are you OK with that?

What is the OPPORTUNITY COST?

What would you be giving up to go ahead with this purchase? Once you have paid for something that money cannot be used on anything else so make sure you are using your money wisely, think what else you could use that money for and decide if the purchase is still the best option for you.

NOW VERSUS LATER

Do you need it now? Is there a benefit to having it now or waiting till later?  Could the price change or there be a better option in the future?

QUALITY OF LIFE

Will it make you happy or improve your lifestyle?  Sometimes happiness is enough as we are here to enjoy ourselves but just don´t use this reason for every purchase.

FINALLY - IF YOU ARE NOT SURE WALK AWAY

Walking away lets you view the situation from a different perspective, if you leave the shop and move onto the next and don´t think about it again then it is probably good that you did not buy it. If not and you go back and buy it, then you know it was not an on-the-spot emotional decision.

SO REMEMBER TO THINK ABOUT:

Product

Seller

Situation

Comparisons

Opportunity Cost

Now vs. Later

Quality of Life

Hope that helps and gives you somethings to think about next time you are trying to decide on what to buy.  Remember every time we buy something we are making a financial decision so it is useful to get into the habit of using financial analysis (like what you have just done above) to make informed decisions.  And once you make smart buying decisions this will lead to more money to save, invest and enjoy nicer things at a later date too.

You can profit a lot from reading people´s opinions as long as you know how to read them effectively.  Investment opinion articles and personal finance articles are very common nowadays.

However, opinions can be helpful or misleading so it is important to determine whether you agree or not with them by using these top 12 tips and some critical thinking.

1. Set Your Expectations

You will never find a no-risk guaranteed high-return investment written in an opinion article – so don´t look for one or believe it if someone tells you it is one.

2. Don´t Miss The Boat

Wait, isn´t it the other way around? If you read about it in the papers you have ALREADY missed the boat?  A tricky one this. If you are investing on that one piece of news (i.e. Google profits soar 50%) then you have already missed the boat (professional traders would have traded on that news earlier). However if the opinion talks more about long term initiatives or the future then you may not have missed the boat.  Remember, Rome wasn´t built in a day and you are looking for nuggets of news that gives insight into how things may be in the future.

3. Know Your Source

Always ask two questions: what have they got to gain from writing this article? and; why should they be considered an expert on the subject?   Weigh up the negatives and decide whether it is a reliable source.  Read marketing materials with caution.  Any post of the internet should be regarded suspiciously as you don´t know their expertise level.  Even newspaper articles should be read with some scepticism as they are written to sell papers so sometimes their opinions are exaggerated.

4. Understand What Is Being Said

If there are some words, concepts or acronyms you don´t understand then it is either a badly written piece or it is not meant for your readership. That being said the more you read the more you will understand so keep picking up investment opinion articles as the good ones will explain new concepts and ideas to you in a way you will understand.

5. Does It Make Sense?

Does their reasoning sound reasonable?  You may understand it, but now you need to take it one step further and decide whether their opinion makes sense. Try and follow their reasoning and decide whether you agree or.  Cut through any waffle and get to the reasoning and then ask yourself “does that sound realistic?”

6. Play Devil´s Advocate

Come up with reasons and an explanation for a counter-argument.  Which argument do you think is stronger, the article or the counter-argument?

7. Demand & Supply Rules

The most fundamental economic concept needs to be considered every time you read an investment opinion piece – simple as that.   What is the demand for such investment? Why might the demand increase in the future? Are we still going to need this in the future? Secondly, how much supply is there? What are its competitors?  What are it´s competitive advantages? Why might supply for this product or a substitute product increase/decrease in the future?

8. Take Out The Emotion

Yours, theirs, or anyone else´s you ask.  Emotions don´t help us make good investment decisions.  If it is an emotional subject then you have to recognise this and decide how this might add bias to people´s opinions.

9. Formulate Your Opinion

Try and take away from the article your opinion about the subject which you can support with reasons. Or, if you don´t have an opinion, try and formulate some questions you would like to answer in order to form an opinion.

10. Always Get A Second, Third, Fourth Opinion

Never decide outright on just one opinion. Look into the subject further.  Internet searches, additional newspaper articles, opinion of a trusted financially-savvy source.  Obtain additional opinions and reasoning following these top tips.

11. Discuss further

Discussion will enhance your understanding of the subject.  Many people like to discuss these topics, either in forums, internet groups, interested friends, family friends, financial coaches.  You can discuss a subject generally or specifically. Try and get the other person´s view before you give your own.  Gauge people´s responses but always “know the source”.

12. Awareness, plans, results – possible next steps

Increasing your awareness about investments and personal finance unlocks the door to possible new ideas and opportunities.  If you find something that looks interesting then look into ways you can gain more understanding or expertise.  A financial coach can help you simplify saving, investments and your personal finance options in order to help you develop a plan based on your personalised goals and objectives.   It is a way to grow your savings and understanding at the same time.

Happy reading!

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It won´t take you long but it will save you money and increase your financial security.

1. You need a cash emergency fund of at least 3-months salary to cover the unexpected. Set up a direct deposit today into your savings account in order to build up to this amount.
2. Know the cost of using your credit cards. Check the interest rates and fees associated with your credit cards.  When you use them always ask yourself is it worth the extra cost. If you have multiple credit cards make sure you choose the one with the lowest interest rate; no point paying more for something you buy.   If you have a high credit card interest rate and you have had the card a year or more consider phoning your bank to ask for a reduction in interest rate. You could well be on the introductory rate but now you have some credit history with the credit card company you could be entitled to a better rate. You never know until you ask.
3. Are you getting your savings-worth? Check  comparison sites today to see whether your current savings account is paying you a fair interest rate.
4. Check your utility bills and bank statements for hidden fees. Maybe it is in way of additional insurance which you don´t use, additional bank charges which you don´t need, or late fees you are not aware of. Understand your bills and statements, query them if necessary or make the necessary changes.

Please feel free to contact me if you have a quick question or query on any of these points.

edward @freegreenbeans.com

Remember we are here to help.

 

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An important factor to increasing your financial literacy and awareness is to relate it back to your own personal situation.  Relating it to your experiences is a key way of maintaining the motivation and interest to learn.  Therefore, perhaps instead of starting with browsing financial dictionaries focus first on understanding your own finances and investments.

There are many places to start; your individual pension plan, your saving account, your employee pension plan, your mortgage or property investment.  Learn the financial jargon associated with these and try to understand the factors which affect these investments.  For instance, if you have a pension plan try and find out the names of the funds you are invested in and research these.  Or if you have savings in a bank account, read articles associated with banks, interest rates or ways to maximise your savings. The more you can relate financial understanding to your personal situation the greater your interest will be.

This approach holds true when reading the money and financial sections in papers too. National newspapers are a good place to start as they are generally impartial and are written specifically to interest the reader.  Start with areas of interest, whether it is property investments, the state of the economy, stock picks or country-specific news.  If you work in a large industry, say healthcare or manufacturing, you may know some companies in the articles thus piquing your interest even more.  If you don´t know any specific financial jargon then look it up but you will remember it much quicker if you can keep it in context.  After reading, try and analyse the article, what is it saying?  What could that mean to you, your friends, the world in general?  Critical thinking will make it clearer in your head and the next time you read a related article you will be able to expand on your previous view or opinion.

Finally, don´t get disheartened.  The world of finance and money will become clearer the more you focus on your own finances and the more you read and analyse.   And don´t forget there is always financial coaching to help you too.

Personal finance is how you look after your finances and includes everything from keeping a check on your daily expenses to having a pension plan.  It has tried and tested techniques which once known and executed will have a positive effect on your finances and increase your financial security and boost your savings.   The problem was it just wasn´t focused on when we were at school.  Nowadays, the education body sees the importance of teaching personal finance as a subject and is trying to incorporate it in the curriculum at school so our kids will learn the basic tools and smart habits, however we missed out.

Personal investing however will not be taught in school as there are no proven fool-proof techniques.  There are certainly measures and analysis that can be undertaken to maximize your success but you will never have guaranteed results.   Research, experience, awareness and continual assessment are fundamental keys to personal investing and executed correctly personal investing can help you hit your financial goals.  So personal finance you should just know and the other, personal investing would be great to know.