09 Aug Top Ten Personal Finance Mistakes – Part 10
Emotion leads to irrational decisions and it is never good to let emotion rule when it comes to finance. Some people use spending to cheer up and avoid feeling depressed. Emotional spending will crash you budget. But saving money will be the long term road to financial independence and ultimately, happiness and freedom from worry. After that, all you need is health.
Alan Greenspan used the term “irrational exuberance” to describe the stock market of the late 1990’s. Anyone who had money put it into the stock market. Why? Because it was the thing to do. When 9/11 happened those same people pulled their money out of the market causing it to drop. Why? Did company’s stocks suddenly become worth less? No, it was the uncertainty and worry about hte future. As it turns out (and it always does), when the market was low, it was the best time to invest.
The same is true for real estate. Real estate investors make their most when the real estate market reaches the bottom. Don’t follow the crowd. Plan a steady course and follow the long term plan no matter what others are doing. you don’t have to do what the big guys with huge piles of cash do. Just set some basic goals, determine a prudent course of action in your financial plan and then follow that course with periodic, but rational review of your course.
If you have no direction, go back to Part 1 and re-read this series. Then go on to the last part: See the conclusion to this series in Part 11.