Individuals learn a great many things through classwork, but becoming financially literate is rarely one of them. School may contribute to a person's ability to be a successful member of a team, but not necessarily a rational and contributing member of a team of family members shopping for a mortgage. That process – and many others of financial consequence – is likely to be something a person learns in the trenches when doing so is essential to your family's well-being.
It's sometimes in the heat of battle that you recognize that the key to your financial health is understanding how to be a wise consumer. A first step in attaining that status is the adoption of a certain mindset, one that consists of equal parts skepticism and discernment. Here are some tips on how to be a wise consumer.
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Become a Skeptic
Emily K. Vraga and Melissa Tully, of George Washington University and the University of Iowa respectively, write in "News Literacy, Social Media Behaviors, and Skepticism Toward Information on Social Media" that those who are more news literate (NL) and value news literacy are more skeptical of information quality on social media. It's likely that people with high news literacy also recognize the importance of thinking critically about any advice, advertisements or offers that target consumers by any media form.
As a consumer, to make wise decisions, you must not assume the best about companies or the products they make or services they offer. Instead, analyze the messages you consume each day and consider whether you receive them from trusted acquaintances or no.
Carefully Analyze the Message
As you read and listen to any message, ask, "What is being sold to me?" and, "Why would I be an appreciative consumer of the product?" Instead of inhaling what bombards you every day, dig deeper to determine for yourself what is of value to you and what is not. Also, ask yourself, "What is the motivation of the source of this information?"
As you become more skeptical, encourage your family to question messaging as well. While it may seem counterintuitive, the nonprofit financial literacy advocate Foolproof Foundation suggests that knowledge fosters trust, action and positive thinking.
Be More Discerning
Digital and brick-and-mortar retailers interact with customers through numerous channels – physical stores, kiosks, direct mail and catalogs, websites, social media, mobile devices, televisions, networked appliances, home services and more. Consequently, consumers can easily reject a few items, then immediately toggle to a different browser tab to read customer reviews and prices, look for even better deals on several items at other retailers and order a few. Technology supports a wise consumer's efforts to do the research and comparison shop, which in turn, contribute to the individual's financial intelligence.
While conducting research and comparison shopping aren't second nature to some, the skills can be learned. In fact, Barbara O'Neill, a professor at Rutgers Cooperative Extension, recommends adopting the Rule of Three method to compare one item to another.
The Rule of Three
The method O'Neill proposes requires that you research and jot down the particulars of three competing products offered by three different stores or websites before you make a purchase. First, you determine and record the product or service features that are important to you in making a certain purchase.
Next, compare the three products or services by noting each product's key features. Finally, determine which product or service (of the three) best suits your needs based on your requirements.
For example, you might compare each of three product prices, the need to purchase the products on credit, the interest rate that will apply, additional fees or rewards for each item as well as the product's functionality, quality and usefulness for the given situation.