Investing Traps To Avoid For A Greater Returns

Whenever there is money involved, there are always traps you’ll want to avoid. Knowing about these traps beforehand can make them much easier to recognize. The traps in this article are all psychological in nature, so they apply to everyone.

Avoid the following traps and you’ll be a much more successful investor:

1. The sunk cost trap is primarily caused by pride. With this trap, the investor is attempting to protect his previous decision. For investments, there is more at stake than just pride, however. Sometimes it’s necessary to just take the loss and move on.

* If your investment turns out to be a real dud or is dropping quickly, the sooner you can get out, the better.

* Some stocks can take a decade to recover. Some never recover. Move on when the time comes.

2. Another trap is confirming a poor investment with the person who provided the initial advice. If you’re questioning the quality of an investment, the worst person to get reassurance from is the person who first suggested the stock.

* Don’t fall into a codependent investing relationship. There’s no value in mutually confirming a bad decision to each other.

* Misery loves company, but you don’t have to fall into this trap.

* Seek out an objective source of information to make a wise decision.

3. Avoid letting friends and family lead you astray. Limit the amount of influence your friends and family have over your investment decisions.

* Your brother doesn’t necessarily know anything about the stock market or municipal bonds simply because he’s your brother.

* Only allow others to influence your decisions to the extent they have proven their expertise in this area. It can be challenging to handle friends and family when it comes to money. Be smart.

4. Freezing is a bad thing. You’ve probably heard that there are 2 basic responses a human can have when threatened: fight or flight. But there is actually a third: freezing.

* Do you find it difficult to take action when things are going badly? When there is a challenge, it’s best to make a thoughtful decision and act on it. Don’t wait until it’s too late.

5. Be flexible. Many people believe the first thing they hear without letting their opinion evolve.
* For example, consider the lowly egg. Most of us were brought up to believe that whole eggs are unhealthy. However, even though there is now research to support that eggs are extremely healthy, you’re probably still hesitant to eat too many eggs.

* The first thing you hear isn’t necessarily the most accurate. Be open to all information that’s available. If they were wrong about eggs, consider how many other things you believe that might also be inaccurate.

6. Avoid overestimating your investment acumen. Many individuals want to believe they can out-think the experts.

* The truth is that many self-proclaimed “experts” are nothing more than people who have done a great job of marketing themselves. So you might be able to do better than these people, but it’s wiser to do your research and seek out true experts.

* A good financial advisor is a true expert that spends all day looking at investments and frequently has access to information that the average investor does not.

* Many investors have piddled away a fortune because they were certain they knew better than everyone else. Maybe you’re a financial genius, but can you afford to risk it if you’re not?

Human psychology is a tricky thing. It’s easy to fall into these traps and watch your investment portfolio take a serious hit. When the situation becomes heated, you’re much more likely to fall victim to yourself.

The solution is to be open-minded and honest with yourself regarding your investments and seek the advice of experts.

How To Manage Bill Payments Effectively

Paying bills every month can be pretty monotonous, yet overwhelming. If you have the responsibility of taking care of your own bills, you can definitely relate! Unfortunately, managing bill payments is an essential part of adult life.

Paying your bills each month is essential so continue to have the services you need and the credit you’ve earned without interruption. However, that doesn’t mean you are always on top of getting those bills paid.

How can you best manage recurring expenses?

These five commandments for managing bill payments can help you stay on track:

1. Focus on necessities first. In many cases, the challenge with bill payments comes from trying to manage expenses. You have a limited income, so you want to ensure the money is spent most efficiently. To do that, ensure you’re paying for necessities first.

* Since utilities like electricity and water are most important, ensure you take care of those before anything else.

* In order to keep the roof over your head, be sure to allocate the correct portion of your earnings for the rent or mortgage payment.

* If you feel like you’ll lose your mind without cable, how about just adjusting the package you have? Instead of 100 channels, why not cut it down to 50?

* Look into getting things done without taking on an additional payment. Use your community center gym instead of the expensive club in the city.

2. Review bills for accuracy. You’d be surprised how often billing companies make mistakes! In order to pay only what you’re supposed to, constantly review your bills.

* If printed bills arrive in the mail late, switch to electronic versions. Those are usually available as soon as they’re generated.

* Call the billing company to clarify any charges you’re uncertain about.

* Document when you request to add or remove services.

3. Setup recurring payments. Sometimes the challenge lies in trying to remember when to pay bills. If that’s the case, and if the bill totals are usually the same each month, setup recurring payments.

* Setup direct deposits from your bank account to the account of the billing company. You won’t have to worry about remembering when to pay. Just ensure there’s enough money in the account to cover the bills!

4. Pay bills online. If time is a real issue for you, avoid standing in line to pay bills. Many companies facilitate online payments. Make use of it!

5. Know your due dates. Being able to keep track of due dates can help you manage bill payments.

* If the dates for different bills vary, you can know how to use your money. It’s not always necessary for you to pay all your bills at one time. Put your money to other uses as long as you know the money will be available before the bill is due.

These are pretty easy commandments to follow to effectively manage your bill payments. Remember it’s your responsibility to maintain a positive history of payments. Use these strategies and you’ll be surprised at how easy it can be!

Budgeting for First Time Mortgagees

Congratulations on buying your first home! This is surely a great achievement for you and the rewards can be very exciting. As a homeowner, you have equity that’s solid. There’s so much you can accomplish now that you have this asset under your belt.

What you’ll now realize, however, is that your bank account has started to behave erratically! You’re seeing money moving out of your account faster than ever before. Or so it seems.

What you’re experiencing is a clear case of a budgeting dilemma for a first time mortgagee. It’s completely normal to feel like you’ve lost some control over your finances now that you’re a home owner.

The good news is that you can learn how to budget all over again. It’s certainly going to be necessary for a positive mortgaging experience.

1. Make your mortgage payment first. If you want to continue to hold on to your home, ensure you pay your mortgage on time! Remember the home is yours and you want to keep it that way. As soon as you get your pay check, withdraw the amount you need for your mortgage.

* A great idea is to set up an automatic payment to the mortgage lender from your bank account. That way, you won’t have to worry about remembering to make the payment each month.

* Sure, things come up, but defaulting on your mortgage payment could mean not having a roof over your head!

* Avoid using the equity in your home as a cash advance. Stay as far from additional debt as possible.

2. Prioritize other expenses. With the mortgage payment out of the way, you now have to manage all the other expenses. Now that you have a mortgage, your priorities may likely shift.

* All expenses related to the new home are important. However, you need to ask yourself if all of them are necessary right now. Focus on the recurring monthly expenses that contribute to a comfortable dwelling.

* Social time is certainly important, especially when it comes to maintaining your sanity! But try to cut down on entertainment expenses. Instead of going to the movies 3 times per week, go out once and rent a movie twice.

3. Schedule home improvement. As a new homeowner, you’ll have the ongoing desire to make the home more beautiful. While your pride of place is admirable, it’s important to let better senses rule!

* Make a list of all your home improvement needs and wants.

* Prioritize them, with the ones that make the home safe and livable taking precedence over the others.

* Put a schedule in place for accomplishing everything, and tie that into the associated expenses. Your aim should be to commit the same amount of money each month to home improvement.

* If there’s something you aren’t able to afford this month, simply leave the rest until next month.

4. Make saving a priority. With all that can happen as a new homeowner, it’s more important than ever to set aside money in your savings account. Major repairs sometimes need to be taken care of immediately.

* Have the discipline to put aside untouchable savings. That way, there’ll be something for rainy days!

Mortgaging a home for the first time can leave you jaded if you aren’t able to budget effectively. Pay close attention to the spending of every dollar. Once you’ve mastered that, you can feel comfortable knowing the financial responsibilities related to your home are well taken care of!

What Deal or No Deal Can Teach You About Financial Risk Management

Who would have thought that you could learn about financial risk management from watching a television game show? That’s right! Watching Deal or No Deal can actually help you make better investment decisions.

If you’ve ever watched the show, you’ll know that it’s about attempting to analyze the results of risk taking. There are numbered briefcases, each with a hidden dollar value. Each case you pick earns you the dollar value hidden inside.

In its simplest form, it’s a random system. But you’ve probably thought that you could figure out a pattern, right? Well, while you may have had some luck before, here are some key lessons that you can take away from the game.

1. Random systems aren’t predictable. Simply put, avoid using past activities in a random system to predict future movement. When you’re trying to decide which stock to buy, it’s almost useless looking at its past performance.

* An investment opportunity yielding a particular result in the past doesn’t make it predisposed to produce in the same way again.

* Avoid being deluded into thinking that you can see patterns of growth from past performance.

2. Panic clouds judgment. Have you made an investment that’s now giving you negative results? Have you played the stock market only to realize that it’s now on the decline? If you answered yes to either question, you’ve likely panicked at one point or another.

* The first lesson to learn is panic almost always clouds judgment. The minute you realize your investment is going sour, you lose your composure. Try to avoid this.

* With pending stock market declines, you may feel like you’re at a crossroads. You may want to get out because you don’t want to regret staying in. But allow yourself time to think it through. Determine which action can produce a result you can live with.

3. Fear of loss drives decision-making. The reality is that fear of loss is what pushes you to make a hasty decision. At least that’s usually the case with questionable investments.

* Because you fear what you might end up losing, you may end up opting out of your investment too soon. That may not be the best move. This is often the case with contestants on Deal or No Deal.

* Giving thought to what you’ve lost up to this point can make you feel you took too long to sell. But be fair to yourself. Risky investments are largely based on probability.

4. Dwindling options promote risk-taking. What the game show also shows is that as options dwindle, contestants become more risk-prone. Similarly, you could also be dwelling on past “losses” and that could affect rational assessment.

* Try to leave former investment experiences in the past. The same goes for past performance of current investments. Look at the current investment at face value.

* Determine if you’ll really be better off remaining in the game or pulling out with what you currently have.

So is Deal or No Deal just a game, or is it something that provides you with real lessons in financial risk-taking? It’s definitely a little bit of both. You learn a little from every experience!

Of course, it wouldn’t be a wise idea to use this game show as your guide to financial wellness! But there’s definitely no harm in using some of the examples to help in your decision-making. Learn these lessons, but seek the wisdom of the experts in your financial dealings as well.