Some times back I gave my Interview to Ranjan Varma, where I discussed My views on Financial Planning. I also read his views on Why Personal Finance Articles and Advice is Useless?
Personal finance web has increased to a big size in last some years and most of them give useless information. I decided to Find out what do Readers think about this themselves and here are the results.
Results Of Poll
This is the result of the Poll I conducted some time back at this blog with question “Are Personal Finance Articles and Advice Useless”? The results are based on just 74 votes but its quite an ok sample and the results suggest that only 21% people thinks that its of no use but majority (54%) thinks that’s its useful and rest of all thinks that it depends on the person.
I agree with Ranjan Varma on the fact that Personal Finance articles can give you sense of Direction, but its you who have to take Action at the end. This is totally true. Here at Jagoinvestor that’s the reason why I talk on two things HOW and WHY?
HOW
These are the articles which tell you how you do something, How to judge something etc etc . These are Process oriented articles which are important to know but they are not the Key !! . You can get this information from many places . Examples are
See List of other “How to” Articles on Archives Page
Why
There are other Categories of articles which are Psychology oriented articles which make you think which actually answer your question of Why Financial Planning is important .
These are thought provoking articles which will open your mind and make you feel what you are missing from so many years… I hope I am doing it successfully on this blog. These are the type of articles which you can use to do your Free Financial planning but remember that it needs a lot of efforts and time.
My take on the subject is that Personal Finance articles will be useful to someone only when he thinks about his Finance with a Responsible Attitude. You need to ask lots of “Why” questions, you need to know a few “How’s” and a fraction of “Interest” to take care of your Financial Planning.
Lots of Readers have mailed me and told me how they are changing there views about Financial Planning by reading this blog and how there Finances have taken a better shape now… I feel good hearing this.
Please comment on wheather articles on Financial planning helps you and if yes in which manner, which was teh recent action you took, or which changed your mindset about something? I thank all the people who participated in the Poll… 🙂
“Secret of Happiness is low expectations” In this article we will discuss why it is so hard for us to make financial decisions and what factors play role in delaying our decisions?
When we have to make a decision, there are lot of choices offered to us, which makes our life difficult and hence it results in delayed decision. We will see how can we change our thinking and help ourselves to make our decision making a smoother and better process.
We will also have a look at some examples which will make reading this article better for you.
What makes Decision Making Hard?
The top most reason why we are unable to answer decision making questions is having Lots of Choices. As per Barry Schwartz in his excellent talk
When we want to choose a particular product from a group of products, it’s hard to decide because of more choices that we are exposed to. More choices means more data to process and more data to process means less chances of finding the best product that is suitable for our needs.
What is the reason Behind it?
As per Decision Theory:Â We want to make the best and accurate decision given a lot of choices, because we don’t want to be guilty later when we find that we missed out on the best choice. This is called “Opportunity Cost”. We don’t want to blame ourselves for not picking up the best choice. We often try to avoid that regret which can arise later because of the outcome.
The point to note here is that many a times, just because of the comparison we make, the satisfaction level goes down even though the results are good. Haven’t you felt bad when you saw giving 15% return and others gave an average of 23-24%. But you didn’t ever appreciate the fact that 15% in a year is a good return and you should be happy about it.
Next time while choosing the fund to invest in, you make sure that you buy something which is among the top performers. Watch this Video on how to choose a good mutual fund
He wanted the “best” fund and now compares the list with what he has currently. He should appreciate that what he has is a good fund and can fulfill his requirement… One should try to get the best fund and maximize his returns but if you give your mind and soul for it .. its just not worth it.
Now with so many choices and lucrative offers, it’s too hard for us to choose the best one. Even in my list of Best Equity Funds, you will find it very difficult to choose 1 or 2 funds to invest in. But I gave you just 2 funds and asked you to choose 1 fund. It would be so easy for you because less the choices higher the chances that your choice will be a good one.
Just Imagine a world where there were 2 Term Insurance products, 3 ULIPS, 5 type of Mutual funds and 3 Banks providing Home Loans. What a wonderful world it would have been! I am sure everybody would have a desire of that kind of Environment.
Then we will have very less information to process and there will be less changes of Regret and high chances of Satisfaction.
Do we delay our decisions?
Ask yourself…
Are you not delaying your Investments just because you are not able to figure out which is the best Mututal funds or ULIP?
Are you not trying to find the least rate of interest for your Home loan so that you don’t regret later that you didn’t get the best deal?
Don’t you want to stop your existing mutual funds because now there are other funds who are top ranked and more talked about on television and magazines, even though your Fund returns are very good and it has potential to achieve your goals?
Are you not confused on which stock will move higher and may be don’t invest at all?
There are so many websites, newspapers, blogs out there giving reviews, recommendations about products that a common person’s mindset is now totally confused because of all this. In case you really think you want take your decisions, you should consider Hiring a financial planner?
Is common person really confused or Am I talking Nonsense?
At the time of writing this post at 1:30 in morning… Here are the poll results with 97 votes which I conducted over last 3-4 days and here are the results. 72% people think that “Having lot of Choices in Mutual funds and Insurance Policies does not make “decision making” easier?
In case you are one of the person who voted for YES or NOÂ please leave your comment and let every one know what was the reason for your Vote.
What is the Solution for this Problem?
How to made a decision making process an easy process? It can be to some extent solved using these ideas.
Change your Focus
By this I mean that we are here for achieving our financial goals comfortably, without compromising our family future and smoothly without much tension. That’s the real goal of Financial planning. Once your mindset is set like this, you will automatically not run behind the “best” funds.
What you will try to do is to find out a good product which suits you, just stick to it.
Filter out the Bad policies
Choosing the best product is not an easy task and not worth too. The easy thing would be to filter out the bad products which is easy to do! So in mutual funds you already get rankings and lists of top 10 or top 5 funds or Best policies from ULIPs or good Home loan from a Bank.
I would say they are worth a look and finally you should decide soon enough on one of them but for this you must have shifted your focus from choosing “best” product to “a suitable” product. People who want to Buy good mutual funds for long term can Choose any one of mutual funds listed in my article on Best Equity funds for year 2009.
Think Less and concentrate more on Fundamentals
There are more Important things than Best timing and Best product which you have to concentrate on. One of them is Consistency in your Investing and your Plan, your Asset allocation, your Diversification. Once you concentrate on this and forget all other materialistic things, it would be a more peaceful activity to manage your Finances.
Conclusion
So we can say finally that it was never like this before. Now a days we have too many things to choose for which has made like worse than even. Hundreds of products do exactly same thing but they all claims to be better than another. We have to narrow down our choices and choose any one of them and not try to hunt for that exactly best product for our self.
Readers, please share your experience of being in a situation where you had to think a lot before making a decision or had to delay your decision. What are your suggestions on this problem? Please post comment.
