In the world of finance, it is very difficult earn the title of “expert.”
Really knowing what money is, how to handle it properly, and how to make it grow takes years of practice and experience. But despite these requirements, everyone seems to have an opinion as to how to best handle your finances.
It is no wonder, then, that so many people suffer through devastating money mistakes from time to time. Here we will take a look at some of the worst financial mistake you can make, and see what you can do to avoid them.
Failing To Get Expert Advice
Money experts, such as financial advisors, dedicate their lives to learning about money and how to make it grow. Everyone should use their services. But many people believe that you have to be wealthy to really benefit from the advice of a financial advisor.
Nothing could be further from the truth! In fact, many of those who are independently wealthy gained such a revered status by following the advice of experts.
Making Purchases When In An Emotional State
If you have ever been to a timeshare presentation, and especially if you made a purchase, you know the effects of making a purchase while in an emotional state. Timeshare salespeople are masters of getting their prospects to enter into a highly emotionalized state, before asking for the sale.
The same goes for good salespeople of all kinds of goods and services, from cars to computers. Your job is to avoid making purchase decisions while in an emotional state, in order to take time and think things through. Once you do, you will often find that you really don’t want or need that expensive item or service.
Mishandling loan money includes many different individual money mistakes, such as:
- Borrowing at too high an interest rate
- Borrowing money you don’t really need
- Using loan proceeds for alternate purposes, aside from the original intent
- Failure to repay loan early when extra funds become available
- Taking a loan to make a purchase which would better be completed with cash
The best way to avoid mishandling loan money is to always make purchases on credit which will either truly enhance your quality of life, or at least help you out in an emergency.
Loans are best taken in order to make sound investments, such as purchasing a home or investing in a solid business. When possible, extra funds should generally be used to repay the loan more quickly. And loan money should always be used for its originally intended purpose.
Gambling Instead Of Investing
We have all seen the negative effects of society mistaking gambling for investing. Usually there is a peak in such gambling when a particular asset class is undergoing bubble conditions, such as was the case with the real estate market in the mid to late 2000s.
Those who gamble on unsound “investments” are likely to lose not only their original investments, but also suffer from secondary effects, such as negative credit consequences. Instead of trying to capitalize on the latest “hot” investment opportunity, take some time to research the market you desire to invest in and familiarize yourself with it.
In fact, it is a good idea to invest in an industry with which you are familiar and have some experience. Overall, as the old saying goes, when it comes to investing – if it sounds too good to be true, it probably is.
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