Sunday, June 27, 2010

Financial Decision Making

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When you want to make a financial decision, such as buying a house, car, or investing in stocks, typically there are underlying considerations. When you want to buy a home, there are considerations with an office location near or adjacent to the family. In short, there are many walks from the decision. Of course there are considerations about house prices.The question is, what percentage of the consideration price compared to other considerations, which encourages you to buy a home? However, try to be honest, did you ever buy an item actually is more dominated by emotional considerations? However, try to be honest, did you ever buy an item actually is more dominated by emotional considerations? However, try to be honest, did you ever buy an item actually is more dominated by emotional considerations?

That is what is called the financial decisions, which are not based on financial argument.So, in order not to get stuck in making a decision like that, there's a good idea retrospect, financial decision making of how well it performed.

Objectives and budget

1. Make sure the purpose of your financial decisions.Buying a home for example, what is the purpose? For new dwellings, or as an investment tool? Whatever the reason it's up to you.What must be understood is that differences in these financial goals will give birth properly different financial decisions.In other words, the financial decision to purchase any consumer goods that will be very different from the goal of productive financial decisions. And you must understand the true consequences of these decisions.

2. Determine how a budget that provided for a financial decision. This becomes an important factor because many people buy things without a clear plan about the cost allocated.Buying consumer goods using a credit card, for example, every month, your bills will be inflated. Or if you buy a house, regrets will come later because the reality is different with the expectation obtained.Or when you buy branded goods, in order to raise the social status.You actually feel "not strong" to spend money to buy the goods, but forced myself to look "great". What happened next is a regret because your friends are also able to buy the same goods, or even more expensive than the goods you have purchased. Buying a branded goods with intent to increase the prestige is not a financial decision. It's more of an emotional decision that only cause problems later in life.

Post-sale and impact

3. Post-sale aspect of the item purchased. Financial decisions that do not consider post-sale aspect of an item will cause regret.Financial behavior is correct when the item is owned by more productive rather than consumptive. Similarly, purchases of goods. If the item has no productive value, including when it is sold again, the goods are classified as cost alone.

In other words, any item purchased should still have value if you want to resell. Such a thing is valid for all the goods you buy and own. If you purchase any item, consider these items can be sold back at a reasonable price.

4. The impact of decisions on the overall financial condition.Every financial decision is essentially a negative or positive impact.Too often we forget that a decision can not stand alone. When you buy a house on credit, for example, will affect your financial behavior in managing expenditure in the next period, because most of the income will be used to repay the loan installments.

Have you ever imagine the effect on your other spending plans? This means that you may have to stop one of your expenses so that cash flow does not deficits. Now, every financial decision should be analyzed impact on overall spending.

Rational argument

5. Rational argument must be higher than emotional reasons. In more conventional terms, can distinguish between wants and needs. All purchases are usually based only on the basis of emotional desire. While the need-based purchases are also not always rational. Included in this are considerations of price, aspects of post-sale, etc.

Although the financial decisions you've believed to be solely to meet the needs, not necessarily rational, logical criteria. Therefore, check again, what percentage of emotional aspects contained in it.

There are many factors to consider before making financial decisions. To facilitate you in making decisions, there is no harm in all of these reasons are recorded and included in the list of considerations. With the list, you can weigh your decision can be justified if it is logically or just sheer emotional. Clearly, decisions based on emotional eating will usually be more than a decision based on rational cost. The choice is yours.

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