Consumers need to take responsibility for their actions

I’ve recently read three news articles over a period of a few days that all had the same frustrating theme: A lack of responsibility on the part of consumers.

In one article, a young couple got amazing first jobs so they went out and bought a HUGE, expensive house… only to have their jobs end due to a change in the marketplace. The couple went to the news because “life had become very difficult” and they were having a hard time affording their house.

In another article, a woman got an Associate degree from a for-profit college and now refuses to pay her student loans back because she feels that the school lied to her: as it turns out, she needs a bachelor’s degree for her job rather than the Associate degree she received but she didn’t know that a bachelor’s degree was required until after she graduated and started looking for a job.

In a third article, a couple went to a car dealership to have their car fixed and ended up buying a new car. They paid the deposit then went home and realized that the couldn’t afford the car so they went back to the car dealership but couldn’t get their deposit back. So they went to the media to voice their concern and forced the dealership to get their deposit back. In the interview, the woman said that it wasn’t until she got home that she realized she couldn’t afford the car.

In all three cases, the newsmedia was framing these people as victims of a system built against them. But what I see is that these people rushed into a decision instead of doing do their own due diligence and figuring out first what was right for them.

Take some responsibility, people!

Yes, there companies that use unethical practices to try and sell aggressively, and perhaps that happened (although aggressive sales strategies was only mentioned in the second story)… and we have several tools at our disposal to deal with that, from ombudsmen to the Better Business Bureau to the Federal Trade Commission to social media.

But from what I read, even in these biased-perspective stories, had nothing to do with unfair treatment or even aggressive sales strategies. Each time I read that these people were actually just people who rushed into a commitment, realized later that it was an error, and were trying to play the victim to get out of it.

There may be times when “I’m the victim!” is the right response and you should go to the media. But were you REALLY the victim or did you just do something in a moment of stupidity? And, did you exhaust your other options first?

What is due diligence?

Due diligence is the investigation and research that an investor should conduct prior to making an investment to determine whether that investment is right for them. This is true for any kind of investment — from stocks to real estate to businesses.

It’s technically a legal obligation for some investments but I would argue that it’s essential for any investment and, in fact, for any kind of agreement or acquisition at all, whether it’s your home or car, or even whether you’re thinking about entering into a relationship with someone. (In a way, it’s all an investment — your car is an investment of money into your ability to get around; your new relationship is an investment of time and energy into a friendship or romance).

Ultimately, due diligence should answer the question: “Is this investment right for me at this moment?

Good due diligence should first seek to understand that investment (or whatever) as thoroughly as possible. Then, it should consider what the investment means to you and your own goals and timeline.

HOW TO UNDERSTAND THE INVESTMENT

To understand the investment, you need to explore it thoroughly. If it’s a stock, you need to study the stock itself, the industry, and market trends (and so much more. If it’s a real estate investment, you need to study the marketplace, the tenants and property management company, and the costs of maintaining a home in that area (and so much more). Even if it’s a potential romantic partner, you need to know what they’re hoping for a relationship, how they enjoy spending their time, whether the attraction is mutual, etc.

HOW TO CONSIDER WHAT THIS INVESTMENT MEANS TO YOU

An investment, by its very nature, requires you to trade something of value for the potential of a return. That thing of value could be money, time, effort, or many other things. So it’s important that you know what is required of you (and whether you have that to give) and what you can expect. And perhaps most importantly, you need to decide whether the expected return is what you want. Many investors buy into something without really thinking about whether it’s right for them at this moment in time; they end up putting up too much value and receiving returns that they are disappointed with.

DO YOUR DUE DILIGENCE — ALWAYS

Regardless of your investment, it is impossible to perform too much due diligence. However, there comes a point when, practically speaking, you’ve done enough due diligence to move forward. I don’t think people have a problem with the idea of due diligence; rather, I think people do too little due diligence.

(Side note: As a real estate investor, I hear a lot of people say that they’re doing their due diligence but what they’re really doing is being stalled by fear and they are allowing that fear to catch them up into a loop of “analysis paralysis”. Strangely, I only see this in real estate and business investments — never in the stock market.)

Do not leave your due diligence in someone else’s hands. Sure, your financial advisor might help you perform some of your due diligence but don’t think of them as a replacement for due diligence! Do it yourself. Be thorough. Don’t rush.

Check out some of my other writing on due diligence including:

What I’m working on this week (June 1 – 5, 2015)

Good morning! It’s the beginning of the week and the beginning of the month… a fresh page!

I was sick last week and struggled near the end of the week to stay on top of my work. I slept a lot. But this morning I’m feeling a lot better (not quite 100% but better nonetheless) and I’m pushing forward on my work.

This week I’m wrapping up a couple of books that were close to being finished last week but I just couldn’t quite see them through to the end. One book is for a real estate investor and it’s close to being completely done while the other book is a full first draft for a consultant.

There are a few other things I need to knock out this week — some blog posts and a couple of articles — but my push will be on these books.

Stay productive!