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Personal Finance with Raphael: 5 ways to control Emotional Spending
Emotional spending is an act of buying something for yourself that you don’t need perhaps don’t even really want, as a result of feeling stressed out, bored, under-appreciated, incompetent, unhappy, or even happy. For instance, when you received a raise or on your birthday.
It’s entirely not a bad habit if you can afford to pay for those items seamlessly and have a robust financial plan to cover your goals without having to borrow or struggle to create these plans.
Emotional spending could be a destructive shopping spree to compulsive shoppers and could cause continuous damage to one’s wallet if care is not taken. But don’t fret – we have listed some steps to help control emotional spending. Let’s dive in…
1. Create alternative activities
Are you a compulsive shopper? It’s time to find new activities to keep you busy and take your mind off the need to visit the mall or buy impulsively on your favorite online website.
Secondly, if you use shopping to cure some of your emotional challenges such as when you are unhappy or feeling stressed out hence you have to see a movie, stop at the bar or buy yourself some good stuff- think of a more constructive behavior that can help you save these expenses as they all add up.
Get some exercise if stressed out or lean on family members and friends if you are distressed. If it’s a friend or relative that makes you spend, you can also deal with it by creating other activities that don’t cost much with said person(s).
2. Create a budget to manage unnecessary spending
This includes celebratory. Get the dates and create a budget to manage all these expenses such as someone’s birthday, leaving do etc. Once you finish spending the created budget, that covers it for all expenses in that category.
3. Accountability
Talk to people about your target to control your spending and let them remind you whenever you are about to incur any unnecessary expenses. In addition, you can have a stick-on paper of your needs on your debit card, refrigerator, car steering, etc. so that you can always see your needs before any unnecessary spending. Confront the feelings behind the habit – it can help you get to the root of the problem.
4. Unsubscribe to adverts
Try to stay away from adverts that could cause you to spend unnecessarily either online or otherwise.
5. Wait out impulse spending
When you find something that you feel like buying just because it caught your eye, but you never planned for it, wait it out for 48 hours at least. If you still feel like having it after 48 hours and you still think you don’t need it, wait out another week or month. There is a huge possibility that you can forget about it and let go in 48 hours.
Final words: When you imbibe these steps, you’ve taken a stand against allowing your emotions to come in the way of realising your greatest ambitions.
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ESTATE PLANNING: LEAVING A LASTING LEGACY
Wakanda Forever. Unfortunately, no-one lives that long.
Chadwick Boseman excited and inspired countless youths and adults when he played the world’s first black superhero, King T’Challa of Wakanda, in the blockbuster “Black Panther.” His recent passing at age 43 shows us that even those who appear to be young, vibrant, wealthy and heroic need an estate plan whose key elements include:
- A Durable Power of Attorney, which appoints a surrogate to make decisions about property and financial affairs on behalf of an individual, especially when or if they become incapacitated;
- A Healthcare Power of Attorney which appoints an Agent for you to make healthcare decisions on your behalf when you’re unable to do so for yourself. This may be combined with a Living Will that expresses your wishes regarding end-of-life decisions, including specific treatments to take or refrain from taking.
- A Trust – a legal vehicle that allows a third party, the trust, to hold assets on behalf of a beneficiary during their lifetime. Trusts allow a number of estate-planning options, not least of which is the ability to avoid the probate process and the cost, delays, and publicity which it might bring.
Trusts can also allow you to control how your assets are directed after your death, not only to whom the money will be given, but also under what circumstances. This control can be a valuable feature when directing assets to individuals with questionable ability to handle money. You can also choose reliable trustees to manage and direct the trust on your passing.
While trusts can be complex, one of the simplest and easiest to execute is the revocable trust, which helps steer your assets through probate, and directs the assets according to your wishes. Changes can be made during your lifetime.
One of the reasons for the continuing popularity of trusts is the ability to limit exposure to estate taxes. Irrevocable trusts can help with this.
- Beneficiary Designations: Ensure your retirement plan beneficiary designations are up to date. Without naming a beneficiary, the distribution of benefits may be controlled by the state or federal law or according to your particular retirement plan.
Speak to your wealth advisor for a more detailed plan. Estate planning can help prevent a number of potentially distressing problems from occurring. By determining how you want to handle your estate before you pass, you save your loved ones a lot of effort, money and grief when it comes to apportioning your estate. And even more crucial – you get precisely what you desire, whether you’re around to see it or not.
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Top 5 Emotional Mistakes to Avoid When Trading Stocks
You know that voice in your head, that says “buy” when you see a stock you know? It is sometimes the voice of your emotions, and emotional buying is never the best strategy. Sometimes it is really hard to drop emotions when trading in stocks because as humans, emotion is an integral part of us. But every stocktrader must know how to pull off the garment of emotions when trading, else, one may make the following mistakes:
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Buying because it’s trendy
There are times when there is a sudden buzz around a particular stock, and everyone seems to be going for it. That is not a great time to go for it. Whenever you buy a stock that many people are buying too, it will be expensive – in some cases even severely overpriced. That’s why you should leverage research from experts like ARM and even do your own research, to allow you anticipate the possible trendy stock that people will demand for, and you get to sell at a higher price.
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Selling when it looks bad
The best time to buy shares is when prices drop. It allows you get a piece of the company at a cheaper rate. A lot of investors who leverage emotions, start to panic and sell their stocks when there is a price drop, forgetting that there will be a price gain soon. Buy when is cheap or the market is bleeding and sell when the market is booming.
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Spending all your money
New investors often get excited about the stock market and invest all the money for their portfolio within the first few days. The results are careless purchases and a lack of liquidity if prices drop. You should put money into your trading account on a regular basis, but always leave some of it there – for the times, when stock prices drop to allow you buy more stocks at a cheaper cost
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Selling all your stocks in a crash
The reality is the next stock market crash is coming. However, we’ve already survived quite a few crashes in recent time. That means: If the stock market crashes, stay cool. It will recover. What won’t recover are your savings if you sell all your shares at a time when everyone else is doing the same. It’s hard, but you should always follow the old rule: invest slowly, sell slowly.
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Putting all eggs in one basket
Anyone who discovers a promising industry is tempted to really go for it. Why buy one tech giant when you can buy three? The problem is, what do you do if the industry collapses? In that case the value of your portfolio can quickly evaporate. That’s why you need to diversify – to invest in many different areas at the same time. Even if one of them temporarily crashes, it won’t hurt you too much. And remember: If the value of a stock drops, it’s a good reason to buy more.
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Best Stock trading tips for investing in Nigeria by Warren Buffet
(This article is based on Warren Buffett’s annual investment letters to his shareholders )
Who is Warren Buffet?
Most investors know who Warren Buffet is, but for the benefit of those who don’t, here is a short bio of him:
Warren Buffett is currently the in the world. He is widely regarded as one of the most successful investors of all time. He is the CEO of Berkshire Hathaway, a company that oversees more than 60 companies, including insurer Geico, battery maker Duracell and restaurant chain Dairy Queen.
Aside from being an investor, he is also a philanthropist he planed to donate over 99% of his wealth. So far he has given more than $41 billion away. In 2010, he and Bill Gates launched the Giving Pledge, asking billionaires to commit to donating half their wealth to charitable causes.
Warren delved into investment an early age, he bought his first stock at age 11 and first filed taxes at age 13.
What can we learn from Warren Buffett?
Invest for the long term
Buffet always encourage investors to see themselves as a part of the company they are investing in, this will make them stick longer with the company, resulting to long term investment.
In his 1996 annual letter to his shareholders, Buffet wrote, “Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher 5, 10, and 20 years from now.”
Buffet advises investors to invest in companies with strong fundamentals and keep their eyes on the long term. He wrote, “Holding for the long term is key, and the best way to accumulate wealth. If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes”
Investigate the company you are buying into
Warren Buffett has a famous quote: “Never invest in a business you cannot understand.” This simply means that before you invest in any company, go deeper in knowing more and give it a detailed evaluation.
In his 1996 letter to shareholders, he wrote, “What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected”: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”
In his investment journey, Buffett has heavily invested in financial stocks like Wells Fargo and consumer discretionary stocks like Coca-Cola.
Although he was skeptical about the tech stocks for a large part of his career, on May 15, 2016, he took a giant leap by purchasing 9,811,747 shares of Apple for $108.99 a share, making his first foray into the tech world.
Don’t buy into the market’s emotionalism
According to Buffett, it’s important to stay calm as an investor.
He wrote in his letter, “Remember that the stock market is a manic depressive. Markets will rise and fall for many reasons, but most of the declines will be relatively temporary. It’s important not to be manic depressive along with the markets. You do this by keeping your eye on the future and ignoring short-term market gyrations.”
Take advantage of opportunities
“Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.” Buffett wrote in his 2016 shareholder letter.
As an investor, you should always stick to the principle of buying low and selling high. With patience you’ll have plenty of opportunities to purchase great stocks at bargain-basement prices, as it’s currently happening with a number of stocks affected by the COVID-19 pandemic. This is the period regarded as the best time to buy stocks.
Excited by all the words of wisdom by Warren? take advantage of current realities by investing in some of the best stocks around the world? Download ARM Stocktrade app today to start investing. You can open a stocktrade account at www.armstocktrade.com and start investing.
