Accounting for every change in a financial situation

If you’re taking a personal loan, pay attention to how interest is calculated if it is fixed. If you’re taking a line of credit, inquire about the rates and the terms of repayment.

Are you familiar with the concept of picking your battles? When you’re juggling financial decisions, this concept does make a lot of sense. Although it is important that you always pay attention to anything you buy or compare prices of, you must be willing to know when to channel your efforts to what really matters — or matters more to your financial health. For example, if you’re buying a home, make time to study almost every single detail even if that means you skip a 45-minute search for the cheapest apple juice at the store. You get the point.

Again that doesn’t mean you need to splurge or overlook small purchases. But with limited time and resources, you should focus on the financial decisions that will have the most impact on your money for years to come. Here is how you can identify those decisions to ensure that you assign them the time and research they need.

New situations

There is always a first to everything. If you’re financing a car for a first time, you might not expect many of the questions that come up during the finance — or know the right answers for your particular situation. There is nothing wrong with taking a step back, asking for explanations and weighing different options — even if the financial transaction at hand is not necessarily a complex one to many people.

If it is a new situation, you also might feel overwhelmed with the jargon and what appears to be a standard policy. Don’t nod in agreement or sign the dotted line unless you know what you’re getting into.

Sometimes you might feel like you’re in a new situation simply because things have changed so much since you last conducted a similar transaction. For example, if you have purchased a house in the early 2000s, you might find that the change in regulations, market trends and requirements make your experience different. So take your time to understand those changes.

Complex situations

Financial transactions, by nature, are complex for many people — unless you’re exceptionally qualified or specialised in finance. But sometimes things get even more complicated. For example, incomplete documentation on a property can trigger a legal situation.

Or a complicated loan scenario can trigger a manual underwriting of your loan.

When things get more complex than expected, be sure you stay focused and get help if needed. For example, you might want to hire a financial adviser or an attorney, if you feel that you can’t keep up with the complications.

Long-term situations

If you’re committing to any long-term financial arrangement, pause and pay attention to its implications. Consider carefully the changes that are likely to happen over the term of this commitment. In addition, make sure you know all the financial details.

For example, if you’re taking a personal loan, pay attention to how interest is calculated if it is fixed. If you’re taking a line of credit, inquire about the rates — fixed or variable — and the terms of repayment. These long-term commitments can be pricey and deciding based on where you stand today may not be optimal.

Take your time to study the alternatives as well. Back to the personal loan example, changing a term from 60 months to 48 months, for example, may increase your monthly payment, but decrease the overall interest you pay over the life of the loan.

That is why taking your time to study any long-term arrangement can save you a lot of money. And while you must be prudent in big and small decisions alike, be sure you don’t miss the big ones.