Americans like choice, but it isn't always that great of a thing. For example, have you ever been frustrated when no one wants to make the decision of where to eat? Too many choices often confuse us or leave us avoiding the decision. Especially when it comes to finances.
A report from AARP showed that all of the financial choices available have simply led to confusion for many baby boomers. Many baby boomers consider themselves to be poor financial managers.
One of the top reasons that consumers are hindered by the plethora of choices is simply a lack of time. Many people don't have the time to sit and research the ever-expanding menu of mutual funds, mortgage products and retirement options.
Lack of financial knowledge is also a problem. Most Americans, almost 40%, actually believe that lenders are required by law to give borrowers the best possible mortgage rates. This isn't true. Consumers must shop around for the lowest rates and the best mortgage terms. Those who believe the above are more likely to fall victim to predatory lenders who charge high interest rates, according to the AARP.
There are many consequences that come with poor financial decisions. What should you do to avoid making mistakes?
Start with a little financial homework.
Shop around. There are significant differences in the prices of goods and services of similar quality, yet only half of all consumers bother to compare the prices. For about 40% of products, the highest price on the market is more than double the lowest price, even when there is no difference in quality. The average household could save around $1,000 a year simply by comparison shopping.
Look for ways to save. By reducing your expenses, you can save a lot of money. If you were to simply take a second job, you would probably be subject to higher federal and state income taxes. If you are in the 15% bracket, you would only increase your household income by $1,000 for every $1,389 you earn. Pay attention to the product. There are so many financial products and services available to consumers. There are many that are great, but there are a lot of investments that are risky. Many consumers don't understand the risks. For example, mutual funds and insurance aren't federally insured and guaranteed, even though they may be offered by a bank.
Learn the basics. Take the time to learn about every type of investment or financial matter that you are going to undertake. Find out the pros and cons of CDs or money market accounts. Research how to buy a new car. Don't buy a new home without considering the risks of the adjustable mortgage you are considering.
Basically, the only way to be truly financially sound is to make sure you know what you are doing. With a little research and education, you can be sure that you are on the right track when it comes to your finances. A little homework can save you a lot of money.