Why You Must Educate Yourself on Money Matters

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“What can I do to make better financial decisions?” They ask.

“What do you mean?” I retort.

“Well, I'm kind of confused. There's so many financial products and instruments out there – a whole sea of them. For starters, there's over 400 different unit trust funds in Malaysia today. How do I choose one that is right for me, bearing in mind that practically all of them are claiming they are they best? Next, there's a multitude of insurance products, and more are being introduced even as we speak. So how do I choose one that's most appropriate for me? And to make things worse, I get conflicting advice from different advisers. One is telling me to do one thing while another is asking me to do the opposite. Both advisers are smart, qualified and experienced. So who do I listen to?”

This is a lament that I hear on a weekly basis. And I can understand why. While the introduction of new financial products and instruments is obviously a good thing as it gives us more choices, it can also drown the average investor. In fact, just the names and terms of the instruments are enough to intimidate: futures, options, portfolio, beta, p/e ratio, covered calls, money markets, basis points – man, no wonder a lot of people wind up sinking their heads into the sand.

Let me now shine some light on the subject.

Firstly, it is true that there are plenty of financial products and instruments today compared to five years ago. And this situation will continue in the future. Next, there are plenty of advisers – qualified, unqualified, paid and even free – when it comes to money and personal finance. Everyone is oh so quick to tell you what to do with your money, even though they themselves are struggling to pay their bills. Worse, their advice are telling you to go in ten different directions!

This being the case, it is little wonder that a lot of people, which may include you, are confused about the subject matter. A lot of people are in a daze, drowning under a mountain of financial information. How do they make sense of all that information? How do they tell the good from the bad?

One answer would be to refer to the ‘experts'. Now this sounds good in theory but unfortunately does not apply when it comes to personal finance. And why not? The harsh truth is that that there are very few experts on personal finance in Malaysia . Very few.

I know this from my own personal experience.

One of the first things I did when I wanted to take control of my finances back in the mid-80s was to get advice from ‘experts'. So I asked for advice from insurance agents, remisiers and bankers. While I'm sure they meant well, their advice confused me as they advocated conflicting strategies. Worse, their advice took me south of where I wanted to go. It took me some time to realize the truth – they were not the experts that I thought they were.

So while the situation has improved slightly since those days, I will add that you will be sorely disappointed if you rely wholesale on other people's advice, including those coming from the ‘experts'. It's very likely that you'll witness an amazing thing happening – your money will soon be their money!

Since you should not rely solely on ‘experts', what can you do to make the most out of your money? What can you do to take control of your finances and ensure that you'll not be taken for a ride? Well, the answer is that you have to educate yourself on financial matters.

Folks, there's only one person in the whole world that will care about your money as much as you – you. Nobody else will care about it as much as you. Further, the only person that can make you rich is you. While others, including me, can help by pointing the way, ultimately it is your baby.

So if you want to be financially independent, you have to educate yourself on financial matters. There is no other answer here .

Let me now share the reasons why you must educate yourself on financial matters.

So you can tell the good from the bad

If nothing else, you'll be able to tell the good products from the bad. There are dozens and dozens of truly awful financial products and instruments. Of course, there are outright scams that will no doubt surface from time to time (ala Pak Man Telo in the 80s and Swisscash in 2007). Without some basic knowledge on personal finance, you could be throwing your hard earned money into these products and scams. End result – your money goes up in smoke.

So you can tell the good from the ordinary

Obviously we all want to choose investments that will work hard for us, optimising the returns with acceptable risks. But you can only do this if you can tell the good from the ordinary.

So you do not have to rely on others

As I wrote earlier, there are plenty of advisers when it comes to money. Everybody has their own thoughts and ideas about it. Unfortunately, most of these ideas are incorrect. If you make your decisions based wholly on their advice, you'll soon be paying the price in more ways than one.

Now while you may still want to refer to others, you do not have to accept everything they say as the gospel truth. You'll have a more complete picture when you add the information given by others to the ones already in your head.

So you can make financial decisions confidently

Some people are stressed out every time they have to make a financial decision. Worse, they are still stressed out even after making the decision! “Did I make the right decision?” The question keep ringing in their heads.

The main reason for this is because they lack confidence. A sure after effect of poor knowledge in money matters. With knowledge comes confidence. With confidence comes better decisions which leads to healthier and richer lives.

So you can minimize your errors and optimize the wins

Another truth about finances is that you will make mistakes. Yes, even if you know it all and have a triple PhD on the subject matter, you'll still stumble and fall from time to time. Hey, even millionaires lose money, you know. However, you'll minimize the errors as you get more knowledge. The error rate drops, the wins become bigger and more frequent. End result, you become richer!

It is cheap

You should educate yourself on financial matters because it is cheap compared to the alternative of losing your money. What is RM29.90 (the cost of Scambuster) when you can avoid losing tens of thousands in financial scams such as Swisscash? What is RM180 (the combined cost of my four books on property investment) compared to losing RM500,000 when you buy properties in the wrong location?

Next point. How do you educate yourself on money matters? Very simple – you can do so by reading books and attending talks and seminars on the subject. Considering that a lot of other important things in your life (which includes your health and well being) is highly dependent on money, I say it is certainly a worthwhile thing to do.

At the same time, I must add that this is not about showing off your knowledge. That you know more than others. That you can prove them wrong, wrong, wrong. This is not a competition about who knows more or who’s smarter. It is about using to knowledge to make better financial decisions so you and your family can live happier, healthier and richer lives.

So get educated on the subject of money. The more you know, the richer you will be.

Copyright © Azizi Ali 2008

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