Making smart financial decisions will help shape your financial future and is key to avoiding buyers remorse. Many Australians struggle to make large financial decisions due to the number of choices on offer and time constraints, which often cause ‘buyer remorse’.
The Decision Drivers Report recently published states that one in 10 Australians feel that they are ‘out of control’ in relation to their finances. Over half, 51.5%, put a budget into action so that they can buy larger items.
More than 28% of Australians had also made large financial decisions that they later regretted, and more than 69% have bought items that they have never used.
The hardest financial decisions Australians encountered, in regards to housing, was whether to buy a home or to continue renting with 26% of survey respondents saying they struggled to decide which was better for them. Another problem decision was which suburb to live in, with 22% finding this difficult.
Surprising, though, most respondents – over 90% – said that the smaller decisions in life were often harder than the larger decisions. Selecting a laptop to buy, or a phone rated as harder than deciding whether to rent or buy a home or where to live.
Interestingly, most respondents said that choice for smaller decision was unlimited, and this is what made it confusing. Whereas buying a home or finding a suburb to live in where constrained by budget, travelling distances to work and family, and lifestyle preferences. Therefore, choices were limited.
Consumer behaviour research conducted by Deakin University found that family were once the greatest influencers and advice sources when it came to making financial decisions. Discussions held around the family dinner table are becoming something of the past as most families are spending less time eating together and more time online.
Web sites and information blogs were becoming used as guidance, with more people electing to listen to knowledgeable sources, rather than family. Trust was shifting from the family to outside sources. This move saw many people experiencing information overload, which, in turn, resulted in buyer’s remorse or associated sadness over buying.
By combining online information with the advice and personal experiences of family and friends, you can avoid remorseful purchases. More than 50% of survey respondents said that they valued peer support in their decisions. This approach, say respondents, is there is no such thing as a fake life experience. Older people have lived, they have seen and done things many of us have not, they also understand what makes the world turn.
This perception, say researchers, is why Baby Boomers view themselves as the most knowledgeable generation, and the best decision makers when compared to other generations. Over 85% of Baby Boomers said they ‘felt able to make decisions’.
To make smart financial decisions, it is also important to think with the head, and not the heart. This philosophy makes you accountable for your purchases with logic outweighing emotion. Though, this approach is often easier said than done. So before you buy anything, ask yourself these questions.
1. Do you need the item?
Do not confuse want with need. Need maintains your survival – food, water and shelter. Want is a desire – shoes, a new suit or handbag.
2. Will you use it?
If you are going to use the item every day it’s a good buy. If you’ll use it occasionally, then it’s not.
3. Is it practical?
If the item is effective in daily life, then it is practical. If it has no real benefit, then it’s not.
4. Can you afford it?
If you do not have enough money to buy the item, then you cannot justify the purchase. Do not overextend yourself financially.
If you answer ‘yes’ to all of these questions, then consider buying the item. If you answer ‘no’ to any of these questions, then walk away. The item is not for you and you are better off without it.