Why do we make bad financial choices?

“Financial peace isn’t the acquisition of stuff, it’s learning to live on less than you make so you can give money back and have money to invest. You can’t win until you do this.”

Dave Ramsey

First things first, the world we are in, is uncertain. We do not know what tomorrow might be and many times we are caught unaware, unprepared, and unplanned. Being financially stable or balanced is more important than ever and this factor is bound to the decisions we make.

We tend to make bad choices due to different factors like not having complete knowledge, impulsivity or stress, but it is essential to consider the causes of making bad financial choices and the way to fix them as best as we can.

The need to save

As the world is so uncertain, which means anything can happen or go wrong, we could need some extra amount of money at any point. Most people don't save and this is one very big mistake they are making. There is a need to save by putting money away regularly to have an emergency fund and be sure that you get to make the right choices for your health and well-being if something goes wrong.

Savings is important just as we have been reading from different authors. Though, saving is less fun than spending impulsively, without a doubt, pays off better in a long term.

Learn from people with similar goals

In today's world, many of us are introduced to other people's lifestyles more than ever. However, it is crucial to be more than careful with the lessons we get or take from their lives. We should not make our choices by going with other people whose goals are different from ours or picking a lifestyle so distinct it might as well be strange to us.

This is why it is important to take note of who your role models are before you make any financial choices and whether these role models adhere to what you want in life.

For example, an influencer who travels a lot and spends a lot of tickets and lodging in the most expensive hotel and other things added to their lifestyles, but that is not the best aspiration to have for someone more of a home bird or one aspiring to have more stability in their lives.

Do proper research

We are frequently uninformed about financial matters and we fail to learn more about them by ourselves. We might feel that the topic itself is boring or too hard to understand. But this is a bad mindset that could be dangerous to us.

When money is concerned, it is expedient for us to do our research on it so we aren't making any bad choices or so that we aren't being scammed along the way.

For example, some people will come to us, explaining some investments to us and saying if we put in a small amount of money, we would get double of it within a limited time.

If we fail to do our research and go on to say yes, we would be deceived even before we open our eyes widely. Don't believe everything they say to you, but do your research to see if the business is legitimate or not.

Spend less than you earn

To say the fact, many people have bigger expenses than their income. Do not spend what you do not have, instead focus on budgeting and develop a firm understanding of how much you have and how much you can use.

Don't buy expensive things just to show off. There are people in this category but they are making a big mistake if they do not realize it on time. They buy things just to show off and oppress other people, thereby forgetting that being financially stable is paramount to every individual to be free from poverty in life.

For some, the urge to be appreciated and admired has made them buy stuff they do not use. Little do they know that they will not get there through material things.

The pleasure of such an experience is not worth the consequences, and we might end up buying and paying a lot more than what we expect for such a choice.

So, focus on buying quality things and what you know will serve you well, not just those things that look good in pictures.

Thanks for your time.

Image by Karolina from Pexels and designed on Canva.

[November 24, 2022] (No 323 articles for the year)