When it comes to money matters, the way we make choices is extremely important as there can be a lot riding on the outcome. Our financial lives have grown more complex and we are constantly called on to make key decisions, anything from “Should I pay more off my mortgage or put more into super?” through to “Which blend of investments is ideal for my portfolio?”
It’s a complicated world, and behavioural science sheds a fascinating light on the way we approach financial decisions. Unfortunately, research shows there is often a disconnect between what we know is the right thing to do, and the action we actually take.
The thing is, financial decisions are a part of everyday life – whether it’s looking for ways to save, deciding which credit card offers the best value, choosing a home loan, or planning for retirement.
Whatever the decision, being confident and informed can make a difference to your financial wellbeing and peace of mind. Research by the Australian Investments and Securities Commission (ASIC) found one in three Australians find dealing with money stressful and overwhelming. Yet the study also found one in ten people don’t consult any source of information at all when making money-based choices.
So, what’s the solution? An obvious step is to skip gut instinct and do some research.
There is a surprisingly large range of advice options available. A wealth of comparison sites show the latest deals for a vast range of financial products, and the MoneySmart website is an excellent source of education on basic money management.
The downside of these sites is that the information they offer isn’t tailored to your needs. And that’s where forming a long term relationship with a professional financial adviser, who understands your circumstances and goals, can make a valuable difference.
Interestingly, the Mortgage Choice study mentioned earlier found less than 10% of Australians have regretted a decision made after seeking financial assistance.
The bottom line is that going with your gut instinct may be fine when it comes to selecting golf clubs for the back nine, but it’s no basis on which to build financial security.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
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