What Can We Learn From Our Recession Mistakes?
February 4th, 2010 |
The recession has brought to our attention what have been our bad money management habits and we had to confront these habits one way or another.
Perhaps you were one of those who sold things out of panic when the market hit the bottom. Maybe you thought that real estate prices were going to go up. The feds are tapping specialists called behavioral economists to study why we decide the way we do with regards to money issues. This would help them revise regulations so people will not take on too many financial risks and be better educated on the real credit card fees.
Their efforts are just dealing with the tip of the iceberg. Here are the common mistakes done by people during the instability of the economy and their solutions.
Mistake 1: No emergency funds
We feel complacent about our financial security that we never save for the rainy day. We would rather put the money to use than stash it somewhere.
In the previous year, the number of unemployed people was increasing fast and it gave Americans a fright. If you were among those who panicked into raising your savings, you could have discontinued the effort once you felt safer. This sets you up for another panic situation should another problem arise. To avoid these stressful uncertainties, do make it a habit to save by setting up an automatic withdrawal that credits money from your checking account to a savings account. Don’t let yourself be tempted to touch your emergency reserves.
Mistake 2: Decisions from panic when the market crashed
When you start to panic, it takes the better of you.
When the market crashed in the earlier part of this year, a smart investor intentionally locked himself out of his online account so he wouldn’t have to constantly look at it and make the worst decisions out of panic. Try not to listen to business news that could alarm you too much. Should investments dive, you could always setup a fail-safe feature in your account such as a limit where you could be taken out of the trade before you incur more losses.
Mistake 3: Putting all one’s eggs in a basket
It is human nature to buy into something big time when one expects promising returns, even if we know it is too much of a risk. The excitement can get people carried away into making bad decisions.
Always consult a knowledgeable third party to help you stay objective. While financial advisers or brokers could not prevent you from making unwise investments, you can ask these people to discourage you.
Jeff publishes articles for various online websites. When he’s not busy writing about current events, he takes time to review many consumer products. You can read his latest reviews about the shower water filter where he provides tips for buying and using an Aquasana water filter.
