Ignorance Isn't Bliss

Everyone has the impression that they're relatively well informed. You would be very hard pressed to find somebody who would openly admit to being flat out ignorant when it comes to any issue. But let's face it... there are many ignorant people out there and there are situations in which we're all guilty. With the state of the world economy it is no secret that we should all be more cautious when it comes to spending and that we should all have a safety net for volatile times. It is also becoming ever more important to be well informed, to pay attention to your money and to continually ask yourself: "In this particular situation, do I really know what's going on"?

Upton Sinclair once proclaimed,

"It is difficult to get a man to understand something when his salary depends upon his not understanding it".

Allow me to put this into context and explain why I feel that we should all establish this as a mantra. Businesses survive by making money which requires spending on the part of consumers. Now I am by no means insinuating that the majority of people have greedy and malicious intentions. But I do feel that there are situations where the consumer is persuaded into believing that they need a product or service when it is in fact superfluous. In this case the consumer would have to be considered uninformed (or ignorant). Consider the following examples:

• Dentist appointment: "You need your wisdom teeth out for precautionary reasons".
• Visit with the mechanic: "While under the hood you should get the water pump replaced as well".
• Buying a new house: "Opt for the mortgage plan with 0% down. What a great opportunity".
• Meeting with the stock broker: "This is the investment you're looking for. Move in all your chips".
• Doctor appointment: "We should put you on this prescription, just in case".

It is imperative to scrutinize each and every situation that requires you to spend money and ask "Why am I being told to do this"? The answer likely falls in one of the following categories:

• It is 0% for your well-being and 100% for their pocket.
• It is 50% for your well-being and 50% for their pocket.
• It is 100% for your well-being and you truly need the commodity. It is worth spending your hard earned money.

Clearly it is ideal to maximize the number of decisions reflecting the latter. Unfortunately it is unrealistic to be informed on all fronts; we can't be experts on everything. But we need to be able to identify situations where we are ignorant, do some research and become informed so we can critically examine the way in which we spend our money. Heed this advice and you may be able to prevent that one mistake that causes real financial hardship.