5 Ways To Avoid Money Mistakes

zechariahnewman —  July 18, 2013 — 1 Comment

When we hear of rip off financial systems or bad investments they all have one thing in common; the promise of quick money. Most of us have very little patience and this is the hook in our mouth. We never hear the term, “get rich slow schemes” as this would allow time to think. In the children’s fable, The Tortoise and The Hare, we learn that the tortoise always wins. My brother once said, “I just wish my tortoise was faster.” Isn’t that the truth? We want to grab our turtle and strap a rocket to its back. This is the point at which I have made my worse financial decisions. These 5 steps help me to avoid my share of stupid tax.

Picture by http://www.flickr.com/photos/epsos/

1. Breath. There are many studies that show deep breathing allows for better decision making. Give your brain full oxygen and lower your blood pressure. Breath down through your belly button then slowly exhale. Yes, using your brain helps to avoid bad decisions. It moves us from emotion back to logic.

2. Can you teach it? We must be able to explain the investment idea to others. If you can’t do this don’t put money into it. Only invest in things you fully understand. Know how it could make money as well as how it could lose money. Everything has an opportunity cost; know what it is. Fund managers and investment help is great, but don’t let that be an excuse for not paying attention and understanding what they are doing. As Dave Ramsey says, “They must have the heart of a teacher.”

3. Prayer. Pray about it. I have not invested in certain things because I didn’t feel comfortable about them after praying. The burden of proof is on the side of investing in something new. One instance of this was a company that got all of its assets frozen. I wanted to invest, but after praying I didn’t feel right so I didn’t do it. Glad I didn’t now, although at the time that was a tough decision. A lot of people I knew were making good money with little effort. I love the people who lost money in the company and my heart aches for them.

“But if any of you lacks wisdom, let him ask of God, who gives to all men generously and without reproach, and it will be given to him.”~ James 1:5

4. Counsel. Always get counsel from those that do well financially. Get counsel from the ones that will challenge you, not the ones that will be “yes” men and women. Another chance to teach that person about your investment or purchase idea. They will open your eyes to things that you have not considered. You have to be open to being wrong. Don’t get argumentative and stay open to critique.

“Through presumption comes nothing but strife, But with those who receive counsel is wisdom.” Proverbs 13:10  

5. Long term vision. Some won’t like this but I don’t prescribe to market timing short-term single stock investments. It feels too much like the hare in the race. I’m going to hold for the long-term. This helps to avoid microwave thinking and sets my life up to be like a crock pot. No adrenaline rush but highly effective. Investment strategy should be boring.

So if you have made your share of oops financially, join the club. Knowing what to do and doing it are two separate things. Don’t look back except to learn. Look forward, learn your lesson and take your time making decisions. When all else fails ask more questions. With most things we come to decisions too quickly and don’t have enough information. So breath, ask, pray, and ask some more.

What are some things you do to make better financial decisions?

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