5 Shortcuts to Make Great Financial Decisions In Life
Essentially, every outcome that we achieve from our actions or the situations we often land up in, in our lives, are most often the result of the decisions that we make.
Making money is something that has never been close or will be close to a sprint. As a fact, it has always been a marathon. The only shortcuts you can apply in this race are some checkpoints before you make your decisions.
Here are 5 such shortcuts that you can mindfully apply as a check before you make your financial decisions:
Wait for Your Chance
With the flashy statements across newspapers and the tons of tips from so called experts that we read daily on social media, it can be tempting to jump in to what “looks” attractive. There are often magic formulas plastered all over the Internet that promise to give great results, new tools every now and then handing out lucrative proprietary buy and sell signals.
However, before giving in to all that, you must realize there aren’t any secrets, and the money that you will lose out from a wrong decision will be yours. As such, the road to success traverses only through careful choice, effective risk management, and skilled profit taking.
You must remember before taking actions that a strong fort is only built on a strong foundation. Strong financial assets and based on the strength of knowledge. In that sense, you should invest in learning your principles and fundamentals soundly and combine that with intuition to make your choices.
Always Remember Your Boundary
Good decisions are not only those that never go wrong. They also include those wrong choices whose damage doesn’t derail you into a situation out of hand.
Making financial decisions of any kind will always presuppose a risk. If you are to make great decisions, you need to understand what and how much can you comfortably put at stake. If the probable loss from a decision exceeds what your current situation can handle, you must never go ahead with it, no matter what its promising upside looks like. With something like money that has a cold and tangible equation, it’s always possible to estimate what’s at stake and nothing should stop you from doing that.
For instance, if you are a young person, your risk appetite may be higher, for recovery over the years is something that you can expect. However, at the tail end of your career nearing retirement, you must maintain your boundaries of risk taking at a significantly lower level.
Don’t Count Your Chickens
It’s a natural tendency to feel great and extremely motivated when the decisions you make a start swinging in the right direction. However, you need to remember that the money that’s on its slide up isn’t yours until you book that investment.
You must lock that money in before making more risky decisions based on the prospect your current gains. Engaging in more decisions based on an earlier one that seems to be going well can result in a menace. In case of any sudden market changes, the hidden hands can pickpocket all you’ve achieved leaving you in a big soup.
Look Out for Opportunities
It’s very common to be spoiled for choice when even out shopping for investments today. A good shortcut to pick out the best ones is to rank in terms of the opportunity before picking. If you go by the mantras from Rakesh Jhunjhunwala, you’ll find him picking his stocks based on the economic opportunity he perceives from that segment.
For instance, something in FMCG like toothpaste is one that should grow probably, for ours is a country with rising population. Another way he recommends filter out is to look for a competitive culture of that company, or what it has in relation to the opportunity and price. He also recommends trying to spot small cap companies that have the potential to turn into the large cap. Hence, you must develop the eye for detail to pick up based on opportunities.
Protect the Most Important Things in Life
Ultimately, the underlying crux of working hard, earning money or making financial decisions is all to secure a great life for yourself and your loved ones. Many a time, something that pulls us back from making the best decisions despite knowing their prospect is suffering from a lack of security where it matters.
It could be either a messed up personal life, incidence towards substance abuse or even having lack of any kind of security or protection. It’s important to have these sorted and protect yourself where it matters.
Now, imagine not having the freedom to a positive decision for an investment that seems extremely lucrative because you’re afraid of not having enough security money. Or, the idle money that you are forced to hoard over investing to meet unexpected emergencies or even death.
Well, life will always remain unpredictable, but the key to making great financial decisions rests in being secured where it matters the most. In that sense, buying a term insurance plan and building out a portfolio of health insurance plans helps a lot.
It is said that family is the most important thing in life. If you believe the same, buying a term insurance plan will bring some peace of mind to you.
Follow these shortcuts to lay out a stable foundation for making financial decisions that are truly rewarding over the long term.