Spoilt for choice

Tell me this has happened to you too: you’re on the hunt for the best deal out there on something, so you do your research, your due diligence, you shop around. You find the lowest-cost, best-quality option for whatever thing you’re buying. You’re good to go!

And then, out of the blue, you end up in some shop or website and – throwing all your comparison shopping to the wind – you pull the trigger and take the first deal you see.

We might know the right thing to do, but doing the right thing is a different matter. And when it comes to financial products like credit cards, savings accounts and mortgages, choosing gets even more complex.

“People are universally very, very bad at it,” says behavioural finance expert Elaine Kempson, based on her work with focus groups in a variety of countries. One person she interviewed described it as “paralysis by analysis” because of all the complexity involved – “the more I look at what's out there, the more paralysed I become”.

All of which leads us to either stay with what we’ve got, or just go with whatever we find easiest. Here are some top tips for choosing financial products.

See all your options. Gather information on more than one product so you can make the best choice for your situation. Ideally you want to get a view of the entire market to see what’s on offer. With a KiwiSaver fund, for example, you want to look beyond what your bank offers.

Shortcuts don’t cut it. To make things easier, we often try to use simple rules of thumb, like “I’ll just go with what my bank has.” We end up selling ourselves short.

Keep it about more than just price. Buying on price alone won’t get you the best deal – it’s about getting the most for your money. Cheapest is not always best but, conversely, you do not always get what you pay for!

Remember you’re being sold to. Salespeople are not independent, impartial advisers, but we often consult them as if they are. Sales staff are experts at pointing out the features of their product, but their job isn’t to help you compare their offers with other providers’ or even to advise you on what’s best for your circumstances.

Follow through and make the switch. If your comparison shopping reveals you’re in a less-than-optimum deal, try to find strategies to make yourself switch to the better one.

Too many of us stay in situations – or with products – that are not the best for us. We deserve better!