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How to avoid making a wrong financial decision

It is true that nobody knows what the future will bring. However, some experts can predict what can go wrong in certain conditions. When it comes to making important financial decisions, you should be aware of all the factors before taking the plunge. It is often the case, that knowledge and information can bring you closer to success. As for financial decisions, most people tend to make some mistakes that negatively affect their budget.

If you are considering making an investment or just struggling to make ends meet every month, here are some suggestions to help you make better financial decisions:

1.    Don’t let others influence your financial decisions

Most often people tend not to make the important decisions on their own; they talk to a family member, a friend or a colleague. We ask advice and we get bad suggestions, judgments or pieces of information that we don’t need. Sometimes we base our financial decisions on emotional responses from the people around us, and we forget that they are not professionals and not really knowledgeable in the field. This does not mean that you shouldn’t discuss things with your loved ones, but to always stop and think who is encouraging you to spend (or not spend) your money on a new car, house, holiday, etc. Is it that colleague always up to date with economic and financial news or is it your cousin who keeps borrowing money from you? Avoid following the suggestions and letting yourself being persuaded into spending more than you have by people who are in a dire financial situation.

2.    Knowledge is power

If you haven’t researched and taken into consideration all the negative implications that can occur as a result of your financial decision, it means you are not ready to make a decision yet. Studies show that only a small percentage of people have taken a personal finances course or workshop, and not many people have the basic knowledge related to good money management. This is why it is important that next time when you want to buy something significant or take out a loan, you should get plenty of information before making the decisive step towards the purchase.

3.    Find a strong motivation for spending the money

Many of us have been in the position to spend a lot of money on something we wanted, but we didn’t need. This type of shopping is based on emotion and impulse and not on pragmatism. Is it really worth getting a car when you live in the city, and public transport is available? Is it worth sending your kids to a summer camp when their grandparents live close to the mountains, and they are welcome there?

4.    Don’t make decisions when feeling pressured

Some of us make the best decisions when under a lot of stress or pressure, but if possible, it is recommended to avoid making important financial decisions when you feel pressured or stressed out. When you feel like time is running out, you might not make a rational decision, so give yourself the time to relax, and things will become more clear.

5.    Go with your instinct

If you want to make a major financial decision, go with your instinct. If your intuition tells you it is a bad idea, well, it probably is, so don’t ignore your instincts.

It is always important to pay attention when making a decision about money and budget, as it can leave its imprint on our whole life. Knowledge, patience and good advice are important when it comes to making good decisions. 

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