In today’s day and age, it is straightforward to be smart with money. Company reviews and product reviews show you who to go with and who not to go with. At the end of the day, becoming a more discerning customer is your single biggest advantage on a day to day basis. Knowing what to spend your money on and what not to can save you time and money in the long run. In 2018, it was straightforward to produce research on goods you plan to buy. This is especially easy on sites like Amazon and eBay who offer product details and seller details. In this article, I will break down how to become a more educated consumer when it comes to financial decisions.
1. Know the difference between elastic goods and inelastic goods
When a good is elastic, that means that there is generally a lot of substitutes for that good. Great examples of this would include shirts, shorts, shoes, and many others. An example of an inelastic good would be gasoline. Even though someone may be in a financial situation requiring them to seek a cash advance online, they will still have to purchase inelastic goods because there are no substitutes. You can correlate inelastic goods to oligopolies and monopolies. In the end, you have to find the best deal with elastic good out there. If a shirt is too expensive, it is easy to find a better deal. If gas is too expensive, you have to pay for it.
2. Track what you pay
I know that you think the day to day expenses don’t add up quickly, but they definitely do. If you spend just $5 a day on coffee, that is over 1,800 dollars a year on just coffee alone. This is why it is so important to create a monthly budget and stick to it. I use this app called Mint by Intuit, and it is linked to my bank account. This way, it tracks every transaction I make. At the top of your budget, list your take-home pay. Then, list out your expenses underneath it. At the end of the month, you should finish with a surplus of cash. If your money is too tight, you may be spending too much on consumer goods. If you aren’t bringing enough money home, you have an income problem.
3. Big transactions require big attention
When making big transactions such as mortgages or car loans, it is essential not to be impulsive about these purchases. If you get super emotional, it can cause you to make an irrational decision that you will later regret. For example, buying a car worth over half of your annual income is a bad mistake that can lead you to bankruptcy. Also, let’s not forget about student loans. Personally, I wouldn’t take out any student loans. I would rather save up cash and pay for it that way or get other financial aid forms. These big transactions should not be taken lightly, especially if you have other expenses.
All in all, personal finance is essential these days. In fact, it is important than it has ever been. The good news is that there are so many great sources to learn from, like Dave Ramsey and Grant Cardone. These guys are very knowledgeable about finances and will help you make smart consumer decisions. In the end, you have to take control of your own financial destiny.