How to Avoid Excess Spending on Financial Products

There are a bewildering array of financial products on offer. Each one will help to improve our financial situation. But, some will be much more helpful than others. These are some suggestions about how to approach the market for personal finance.

Don’t Buy Under Pressure

Always be wary of being sold financial products and deals under pressure. The quick sale is one of the easiest ways to get a consumer to buy a product before he realises there are better deals on the market. Any significant decision about investment or taking a loan will benefit from being left for a day or two. This means you won’t be pressured into buying something you later regret.

Listen to Recommendations of Friends not pushy salesmen

When making any decision about financial products or buying goods it is advisable to take advice. The key issue is who do we take advice from? It is important to evaluate how trust worthy / independent a person’s advice is. If someone has an ulterior motive for suggesting a product we need to be cautious. Find someone who is knowledgeable about the field of finance and products and who can offer independent advice.

Avoid ‘Optional’ Extras

Many financial products come bundled with ‘optional’ extras. These might include payment protection plans. However, be wary because these options are often the least useful and most expensive part of a deal. Some banks may try to push these extras and make it difficult to avoid buying them together. In these situations it is important to be firm and avoid insurance that you don’t think is worth it. Bear in mind this doesn’t mean that insurance for credit cards and loans is necessarily a bad idea; it is just that the insurance options firms try to sell you are poor value. For example, it is not necessary to get individual payment protection for each credit card. Get one deal which covers them all.

Buy Because it is needed.

Not all finance products we need. Be careful of taking on the latest offer your bank is trying to promote. A good saving and investment plan should have a certain simplicity. If you have a modest savings plan don’t make it complicated by adding complex financial investment’s which require extensive thought and risk.

How does this product help you?

Before taking out a loan or new financial product it is good to be very clear about its purpose and how it will help you. For example, if you are taking out a loan be clear about what you are going to do with it. A loan should be seen as an investment to improve your long term living standards or deal with a tricky situation. However, if the loan is vaguely to help finance current spending patterns, alarm bells should start ringing. Also, for a loan, you should have a clear plan how it is going to be paid back. If you take out another credit card be aware of how credit cards can help you and how they can damage you financially if misused.

Don’t Buy on Impulse

Buying on impulse is an easy way to spend more than we can afford or need. Impulse purchases may seem right for a fleeting moment, but, often the goods and services are rarely used. A frugal shopper is careful to pre plan most purchases. Impulse buying usually means we are being swayed by some sales technique or passing fancy.