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Financial Decisions
Financial decisions are one of those things that everyone want to take advantage of, it does not matter if we consider how much we need to spend on food for the moth and how we administrate our resources, or if we are considering to invest our life savings.
Considering how much we care about it, is important to talk about, how no access (or limited access) to trustful information sources, and excess of consumerism, have become important reasons why a lot of people does not even know about financial aspects; meaning, annual interest rate, future value, present value, or how much the time periods affect each one of those concepts.
And why do I believe that? It is easy to see it in the surrounding people, and also personal experiences, considering that basic public education and social habits leave people with not many tools in order to manage financial incomes or middle and long term goals in the best way possible.
According to that, the paper “El Financiero”, shows the results of the last financial report made by “SUGEF” (General Superintendence of Financial Institutions), which indicates that the Costa Ricans debt have increase from 23% on 2006 to 29% on 2020 and at this moment, that debt is distributed on the 62% of the total population.
Based on that, we should worry about how much time we dedicate to our personal improvement on important areas such as finance and understanding of our business environment and economic possibilities, with the main goal of be able to make better decisions considering more aspects every time.
For example, with only understand how interest rates affects any kind of loan we are trying to get, the decision process could become easier when analyzing which entities offer the better or the worst interest rate; however, not much people understand that and this creates a big gap between those who do not understand the basics of finance and those who at least can difference between a good or a bad option.
In my personal opinion, it is our duty to share the things we learn and find useful with the people we know and try to have as many points of view you can get about it, because this will encourage us to keep learning and creating new questions that help us understand our financial needs and environment.
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What to consider when making financial decisions.
When making financial decisions, there are thousands of questions and factors that might suggest not to continue or to discard some opportunities that could have a little more risk, but better possible outcomes than others.
Based on that, I would like to mention some aspects I always try to consider when making financial decisions in my day by day routine.
First, it doesn’t matter if you need to buy something small like a pair of shoes or pay the mortgage of your house; you always need to know how much are you getting as an income and how much you can spend, this will allow you to have a better view of your reality and possibilities.
Second, you need to select your priorities according to your actual situation, this will make your life much easier, even if you realize that something you want, might not happen when you desire; however, prioritize will allow you to look for creative solutions or different income activities apart from your main one.
Finally, take your priorities as a base and according to your earnings, create a saving plan that includes amounts, periods and time limit for it to be completed, this will avoid spending money on things that are not actually necessary.
Hope you all find this little advices helpful and if any of you have something else to add, please do... we all are learning every day.
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How to establish a good price to sell
Have you ever tried to calculate the cost of a product?
I’m sure that if you had, the process was confusing and almost all the time you’ve end up questioning about if you were able to charge a good price, meaning that you get to offer an average price considering the minimum price you calculate (reserve price) and the price that customers are willing to pay for your product/service.
According to this, I want to show you a simple method, I have used it in order to involve both, minimum price and customers ideal price, this is called “Dutch Auction”, but, what is it?
The Dutch Auction is not a new method, actually, it has been used for a long time, and has' remain as an efficient, inclusive and equitable way to sell products and services; however, you need to keep in mind that is not a known method, exclude financial institutions and the hard part is to determine a reserve price.
Considering all that information, let’s see how this works.
First, you need to establish a reserve price, which in my case, all I do is to calculate the price of the primary materials, then calculate the time that take to finish the product and put a price on it (a price per hour of work) and finally, add a percentage of winnings that I consider good for me, taking in count that I will need to save a part in order to cover possible raise in the primary materials price, add all the prices and you will have your reserve price (please keep in mind that buyers can’t know this price).
Once you have the reserve price, you will need to find a group of people that want to help you try the method first, considering to include as much social classes as your main public represents. When you have the people, the process become really easy; all you need to ask (privately) how much do they want to pay for each piece and how many pieces they want. With that information completed, first, the base will be the price that is more close to your reserve price without going under, and also will assign the amount of pieces that the buyer is willing to pay, then, you will take the better bidder and will also assign the amount of pieces but with the price he offered, then the second better bidder and so on until you have no more pieces to sell.
Finally, it’s important to keep in mind that any method can be modified according to the needs you all have. In my case, what I do is to average the price, adding all the pieces prices and dividing it by the total number of pieces available. Usually, do this has helped me get a price that every one of my clients can pay and be happy with, and also, provide me a discount margin in case some of them need it.
Hope you find this information useful, and if any of you have another method we can apply, please leave a comment and let us learn more about it.
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3 aspects that will help you make the best financial decisions.
We always need to make financial decisions, and sometimes have no idea of what to consider; that’s why I will let you know what I’ve learn.
First, always think about what is motivating you to consider any kind of use you want to give to your money, mainly if we are talking about investments; always consider those implicit and explicit aspects, for example, what am I waiting as the outcome of that decision? Am I considering this because I want it or because I need it? Who are the stakeholders? What are they waiting from my decision?
Think about that kind of things can help you understand the context of your decision and give you a better view of your position and your possibilities.
Second, think about the money flow, and with this I’m telling you that you should consider markets (currency, money, commodities, stock…) institutions involved (banks, government…), and the connection between them all, which can help understand the best way to give your money the best use, considering that at the end, we always try to find the easiest way to recover and get some winnings or increase the value of our own resources.
Finally, always consider repercussions; I know this might sound obvious, however, how many of you consider the 2 aspects I just mention before think about impacts? And I’m not talking about negative things only (which are always important to consider), or losing a bit of money sometimes (because is part of it). I am talking about those things that will represent a good impact on my close environment, for example, how can I benefit my environment (natural and social), how can I help avoid the latest negative effects that recent circumstances have caused; in other words, how can I make financial decisions with less risk and more integral benefits.
If you ever try to apply this and it works for you, or if you already base your financial decisions of similar aspects, let us know your experiences, we can all learn from you.
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