• Home
  • About
  • Advertise
  • Contact
  • Policy
  • Guest Post
  • Archive

One Cent At A Time

A Personal finance blog to get rich

  • Email
  • Facebook
  • Pinterest
  • RSS
  • Twitter
  • Beautiful Life
  • Becoming Rich
  • Beginners Guide
  • Extra Income
  • Productivity
  • Saving Money

3 Financial Decisions you Should Avoid

March 14, 2014 5 Comments

Share this:

  • Tweet
  • Email

A lot of us have made some pretty horrific decisions in the past. Making mistakes is generally thought to be a part of the learning curve; when people make bad decisions, they get a first-hand experience of where they could have acted a bit more prudently. For example, we often find ourselves subscribing for a gym membership when the treadmill at home has been gathering dust for a long time.

Financial DecisionsThat impulsive purchase of the new smartphone with your credit card when you are already struggling to pay the minimum is another example of a bad financial decision. In fact, a relatively new branch of study known as Behavioral Economics is looking at how humans, who in classical economics are termed as rational, end up making such irrational decisions! Well, the good thing about any bad decision is that you can learn from it and vow to not repeat it in future.

Despite burning their hands by making poor financial decisions, some people still end up making one bad decision after another as if their brain has somehow been hardwired to function this way only.

On the other hand, there are a number of novices – college-goers, people at first jobs, people who have suddenly become rich, etc., who are at the initial phase of their financial journey. It is important that we know which financial decisions we should not make. In the following paragraphs, we will take a look at 3 financial decisions that you should avoid.

1.  Charging everything on the Credit Card

The reason we have put credit card at the first position is because it is one of the most easily accumulated debts. All you got to do is to spend some hours at a shopping mall on a Sunday evening! A credit card gives you a false sense of your ability to buy things.

Looking at a nice watch with a price tag of $1,000, a lot of people might say, “Oh, I have $3,000 in my credit card, even after buying it, I will still be left with $2,000.” However, what these people fail to understand is that the $3,000 that they have in their credit card is not their money. It is an amount that has been loaned to you on the condition that you return it quickly to the bank, or otherwise keep on paying interest until you clear the debt.

Buying on credit should be kept to a bare minimum. I would have advised you to shun credit cards altogether hadn’t it been for the important role they play in building a good credit score. Therefore, my advice to you is to do an assessment on where you stand financially. It will give you an idea about how much you can actually save, invest, and spend every month.

Keep the credit cards out of the equation, and use it once in a couple of months for small expenses such as gas, or eating out. This way you will keep yourself out of the vicious cycle of credit card debt.

2.  Investing in Stocks without doing Thorough Research

So John, who lives next door, put the downpayment on that new car from the gains he made from the stock market. Impressive, isn’t it? So what are you waiting for? Shouldn’t you too funnel your savings into the stock market and make a hefty profit from it? Well, if you put money at stake in the stock market without doing any thorough research on your financial state, and on the fundamentals of investing, you might be in for some trouble.

First and foremost, you need to have a rainy day fund which will see you through the downs of life, such as the economic crisis of 2007-08. It is usually advised that you should have three months of living expenses in a rainy day fund. After securing an emergency fund you should think about investing in stock market. Before you take the plunge, grasp as much knowledge about stocks as you can. Don’t try to look for a short-term gain when you are taking your first steps.

Day trading is highly speculative, and even traders who have decades of experience in the stock market don’t get it right consistently. Form a long-term strategy and try to diversify your investment across different sectors. It is important that you don’t panic when you see your stocks tanking.

There are a lot of important points on stock trading that you should understand before actually putting your money in it.

3. Trying to Keep Up with the Joneses

From personal experience, I can tell you that one of the basic and common reasons why most people make a bad financial decision is because they want to impress others around them. The urge to be accepted in a social circle can make many people to accumulate debt quickly.

Often, we buy not because of the perceived value of the product, but because of how it will enhance our image in the eyes of others. The modern-day social structure puts a lot of value on the materialistic possession of people, and this is one of the prime reasons why most of us probably will never be out of this rat race.

The desire to own McMansions, expensive cars, latest gadgets, etc. so that we are not left out in this fiercely competitive world puts a lot of pressure on us to stay one step ahead of others. However, it should be remembered that most bad financial decisions are a result of this constant comparison with others.

We need to realize that the people we are trying to impress won’t be impressed anyway; instead they may find a fault with everything we do. Therefore, it is important that we spend our hard-earned dollars prudently and avoid spending on products that we can really do without.

This will go a long way in ensuring that we stay debt-free and do not regret while we are about to retire.

About the author: William is a finance blogger, freelancer and copyright editor from NY. He blogs at Daily Gains Letter

LIKE THIS POST?
I agree to have my personal information transfered to MailChimp ( more information )
Join our community of 8000+ subscribers to increase your net worth and build wealth
We hate spam. Your email address will not be sold or shared with anyone else.

Share this:

  • Tweet
  • Email
The tool that changed the way I manage my personal finance - Personal Capital, The Best Free Personal Finance Tool

Want to start a WordPress blog now? The onecentatatime.com blog is hosted by Siteground Web Hosting. For only $3.95 a month, Siteground can help you set up and host your website/blog quickly and easily.

About the Blogger Hi I am SB, a personal finance enthusiast with a career in software development. I am an immigrant to the USA since 2005, after being born and brought up in India. This 40 something technocrat lives and breathes personal finance whenever he gets time from the day job, job as a husband and a dad

Some links on this page may be affiliate links, if you make a purchase following the links, I may earn a commission. Read affiliate disclosure here
« Finding the Positive Side in Bad Financial Situations
Top 10 Ways to Save Money on Food Bill »

Comments

  1. No Nonsense Landlord says

    March 14, 2014 at 8:16 AM

    Credit cars are good, but you have to pay in full. get the points, and leave the cash at home. Log purchases in Quicken or similar, and balance the card at every billing cycle.

    Stock purchases are best left to professionals, who 85% cannot beat the market. Buy stock index funds. Even Warren Buffet does that. and some solid companies too.

    Keep up with yourself. I would rather be a multi-millionaire, and look like a pauper; than look like a multi-millionaire and actually be a pauper.

    And buy real estate, and know how to manage it. Most of the world’s wealth was amassed with real estate.

    Reply
  2. Upwards of Twenty says

    March 14, 2014 at 3:27 PM

    Number 3 is the most important in my opinion. Sometimes credit cards have to be used and uneducated stock purchases are at least an attempt at investing. Keeping up with the Joneses is the reason more than half our country is in debt. If one is serious about amassing wealth and security then they should never care about what there friends, neighbors, or anyone is spending there money on. It is a difficult task in the country we live in. JB

    Reply
  3. Alex says

    March 14, 2014 at 4:51 PM

    I have no sympathy for anyone who makes wild financial decisions, especially if it’s based on advertising. On the other hand, I don’t earn nearly enough and have never earned more than 15k a year (yet) so things like the latest smartphone are never within my reach (nor care to have one).

    Reply
  4. Marvin says

    March 16, 2014 at 12:56 PM

    I see individuals investing in individual stocks when they cannot even define Market Capitalization or net income. Unfortunately I believe this is the majority of Americans, they believe the stock market is another casino that they can game and get rich quick.

    Reply
  5. Leonard @ The Wallet Doctor says

    March 16, 2014 at 5:30 PM

    Great tips! Everyone needs to learn how to use those credit cars sparingly and responsibly. Just charging everything to it is sure to lead to problems down the road. Thanks for the great post!

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.



Create your own blog in 20 minutes and $20

Personal Capital, a free tool to change your financial health today

I use and suggest Upstart, for your personal loan need

CreditKarma, a free tool to check your credit scorey

I use Coinbase, for my crypto investments

101 Cents at a Time

101 Ways to Earn Extra Money on the Side
201 Frugal and Perfect Birthday Gifts
101 Ways to Save Money Everyday
101 Ways to be Better and Successful at Work
101 Ways to Save Environment and Energy
101 Frugal and Romantic Anniversary Ideas
101 Low-Cost Men's Fashion Ideas
101 Personal Finance Tips
101 Ways to Reuse Household Stuff
101 Things to Do, When Nothing to Do
101 College Graduation Gift Ideas
100 Tips for Ecommerce Startup
101 Ways to Enjoy Indoor During Winter
101 Ways to Beat Procrastination

Popular Posts

Quick Cash - How to make $100 legally, in a day
Living well on less than $15,000 a Year
Top survey sites for side income
What to do when auto repair goes wrong
Where should I invest my money now?
20 Ways to be productive and happy at work
51 Ways to get out of debt
Be a better person in 15 days, 15 ways
Income ideas for retirees and senior citizens
51 side jobs for college students
Urgently need a large amount of money?
Should I buy or should I rent?
Best Personal loan providers
25 Ways to save environment
25 DIY car repairs to save money
How to decorate office cubicle
How to show your wife you care
50 Financial Rules for Success
51 Frugal weekend family activity ideas
Become Rich By Saving 1 Hour Of Daily Wage
How much do I need to save for retirement?
How to negotiate your salary

Follow us on FaceBook

About Author

SB

Blogger by choice and IT manager by profession. Finance is my passion and gardening is my greatest satisfaction. Born in India, settled in US, Husband and a father. I created this blog in 2011 with a vision to help others. Thanks for your patronage. More info on my "about" page.

View all posts


Subscribe

Join our community of 5000+ subscribers to increase net worth and build wealth

Advertisements

Personal Stories

How I got a new HP computer replaced
Was COVID circulating in USA in fall of 2019?
How my credit score went up 800+
Why I didn’t invest in Bitcoins
How I controlled impulses to buy things
Why this blog is named One Cent at a Time

Subscribe via Email

Site Disclaimer

Disclosure of Material Connection: Some of the links in this web site are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”
Read full Affiliate disclosure


One Cent at a Time is published by SB. The opinions expressed herein by him are his own and not those of his employer or anyone else. All content on One Cent at a Time is for entertainment purposes only. By reading this blog, you agree that SB and/or One Cent at a Time is not responsible for any actions taken after reading this blog. For the full disclaimer, click here .

Major Media Mention

One Cent at a Time Media Appearances

Copyright © 2023 One Cent At A Time · Designed by Nuts and Bolts Media