A Case on Financial Contracts:
Caveat Lector – “Let The Reader Beware”
Excitement, desperation, and ignorance – the three most common factors that can have a very daunting aftermath if not controlled and rationalised.
Now you must be wondering, “this is a finance article – what on earth do these factors have to do with anyone’s finances?”.
Well, like anything else in the world; money and our finances are largely affected by the decisions we make on a daily basis and these are essentially fuelled by how we feel, how much we need something and how much we know about said item.
Let us briefly explore how financial contracts are the major downfall of many people in society as well as how we can avoid falling into the trap.
“What is a financial contract?”, one may ask…. This is a contract (legally binding agreement) where there is some form of cashflow generated either for immediate ownership of an item, enjoyment of use of an item, or for the promise of some future value or future ownership of an item.
All too often, we rush to sign contracts without understanding what exactly we are agreeing to. As mentioned before, this is usually due to excitement (being too happy that you got approval), desperation (being in a situation where you “don’t have a choice”) and lastly being an ignoramus (having the resources to gain more knowledge but simply not utilising them).
Summons, default judgements and garnishee orders! These are all the likely repercussions of an individuals’ decision not to carefully read through a contract.
In conclusion; how then do we avoid the debt trap and buyers’ remorse:
➢ READ every single page of a contract
➢ ASK relevant questions – there’s no dumb question when entering a contract
➢ UNDERSTAND the interest rates – whether interest paid, or interest earned
➢ WEIGH your options – do not settle for the first offer, shop around
➢ RATIONALISE your decisions – avoid making emotional decisions for finances
➢ PRIORITISE your needs – know your capacity to service debt and live within that
➢ KNOW your rights – understand clauses, power to negotiate and cooling-off periods
➢ CONSULT a financial planner – they can assist with the grey areas
Financial Wellness is not a luxury!! It’s for everyone!!
Thabo Ntini RFP™; Professional Financial Planner and Wealth Management Expert