Here are 3 suggests for resolutions you can make to improve your financial life in the year to come.
- Do not sign anything you don’t understand.
If you don’t understand it, don’t consent to it. Don’t sign, don’t say yes, and don’t agree to anything that is not understandable, clear and complete. Isn’t that easy? It may be a little bit more difficult than it sounds, though.
I, for one, will tell you with absolute certainty that I never sign anything that I don’t completely understand. Except, as you can probably guess, it isn’t true. It’s not just those “on line” monstrosities where one must click “I accept,” either. I have signed lots of contracts full of terms whose meanings were vague, unintelligible, ridiculous or (on rare occasions) in a language that I don’t even speak.
The point, though, is to stop entering into transactions that you don’t really understand. Refuse to accept jargon, fancy sounding nonsense, or specific language that you do not comprehend. Rather, insist that things be written out so that they would be clear to any reasonable person. This can take a bit of chutzpah since you will be slowing folks down in a world resolutely determined to speed everyone up. And the slight embarrassment you may feel can easily be used against you. Be brave, you will find it is worth the awkwardness. Here are two sure benefits. (1) You may discover that the deal is not quite what you thought or exactly what you wanted. (2) Later, if a disagreement arises, other parties will not be able to hide behind the language you didn’t understand.
Resolve that your will struggle mightily to sign only what you understand and understand everything that you sign.
- Reduce your investment expenses.
Stop leaking so much money from your investment accounts. How much are those companies taking from you? Directly? Indirectly? Surreptitiously? You probably don’t even want to know. The truth is, though, it is probably far too much.
Fair is fair and financial firms are entitled to proper payment for services rendered. There is a tendency in the industry, though, not to be satisfied with “fair.” They usually want some sort of a “piece of the action.” Or, at the very least, they want more. At what point does it cross a line and become excessive? Wisdom teaches that it must be your job, not theirs, to keep their greed in check.
Do a little digging. Research what you are actually paying. Find out what the lower cost alternatives might be. Try to figure out what you are really getting for your money. A good place to start is www.morningstar.com where you can look up mutual fund annual operating fees, sales charges, and portfolio turnover rates (which are a decent proxy for the funds’ transaction costs). Then read one or two good books on the subject.
The effect of excessive fees on investments, added up over a lifetime and compounded by your actual rate of return, is more than you would believe. I will write further about that in the days to come. For now, though, let is suffice to say that you can’t afford it.
Resolve that this will be the year the financial services industry gets not one penny more than the fair amount from you.
- Realize the power you have in negotiating your investments.
Finally, stop accepting the idea that you have little power in your dealings with financial firms. Most people believe that they have no recourse but to do as they are directed by the bank, the investment company, the insurance firm, the credit card company, the mortgage banker, and their various advisors. They are absolutely wrong about that.
Power in negotiation comes from having strong alternatives. The financial services industry is so lucrative, and has become so competitive, that almost anything you can get from one provider you can also get from many others. You have the ability to walk away and go deal with the competition. They, on the other hand, badly want your business. They need you –or at least customers like you- to remain profitable. If you let them know convincingly that you have real choices, they will go a long way to try to meet your needs.
Thus, surprisingly, it is you who has the greater power when you bargain with most financial service providers. Do your homework, know your realistic alternatives, be clear about what you want, and then stand firm. Remember to be polite, it is always helpful. Pay attention to whether the person you are talking to has the authority to do what you want. (If not, get yourself talking to the one who does.) Remember, if you have the power to walk away unharmed then you are probably the stronger party in the negotiation.
This year, resolve to make sure that all the financial deals you enter are the best possible agreements for you.