I was recently invited by a successful investor friend to hear a well-known tax professional speak on tax minimization strategies. After the hour-long overview of simple concepts, the speaker offered the several hundred participants an opportunity to purchase what he described as a "no brainer" strategy. The detailed overview of the program (complete with video footage) seemed fabulous – particularly with the added incentive if we signed up before Friday.

This situation is repeated over and over again – sometimes in financial terms, sometimes in retail, or other similar environments (ever watched an infomercial?) This time it was a group setting, but it can also be found during a one-on-one with a financial professional, or even with your friends. It could even come as written or other media format by an unknown third party (email sales letters for example). The bottom line is always the same – HOW DO WE DECIDE if this is really the answer to our prayers, the road to riches, or simply a sales pitch and someone's opinion?

I am not going to offer an evaluation of this opportunity; rather I'll use it as an example to help you make decisions in the future. These ideas were originally developed when I worked with the provincial securities regulator to update their program on avoiding investment fraud. The principles: KNOW YOURSELF; KNOW YOUR ADVISOR; KNOW YOUR INVESTMENT (in this order) are now the organizing principles for the delivery of investor education for the province. Invaluable material to assist individuals to make sound financial decisions can be found at www.bcsc.bc.ca under investor education. As well, you can send a note via www.moneyminding.com and receive the "MoneyMinding Evaluating Solutions Process" which was created for the same investment fraud presentation.

Your most important decision making criteria is to understand your motivation for being interested in the first place: What do you expect to learn? What hopes, desires and incentives would you like to have answered by this strategy? You must know what you expect, and then you must know why!?! I went to the tax presentation because I am looking for ways to save tax; because I am always on the lookout for different and creative financial strategies; because I respect my friend's position as a professional investor and wanted to learn more about something he believed in; and I wanted to hear the speaker. My why was simple: I really, really, really don't want to end up with a big tax bill this year. Also, in my profession I am frequently asked about different investment strategies – not just ones that I recommend, but others that are available in the marketplace – good or bad.

The next check point in making financial decisions is to learn about the person making the offer to you: How are they compensated? What is their background? What is their expertise and experience? How well do they know you, your goals, your situation and your background?

In my example, I knew of the speaker, and my friend, although not an advisor is someone I can talk openly with about our personal finances. He has a strong investment background and I am a professional advisor myself so understand the concepts presented. But, if my husband and I had gone by ourselves, then we would likely want to ask another professional what they thought of the strategy for us. And... if our advisor wasn"t at the meeting, or had no previous experience with this type of program, then we would be left on our own to make the decision, or left to interpret his opinion of the strategy and it's appropriateness for our goals.

Finally, the financial decision process moves to the specific investment or strategy itself. This is always where people get bogged down because they focus on one aspect of the program: usually rate of return or tax. This is where presenters can bring emotional elements into the discussion. Yes, we all know that a higher return is better than a lower one, and less tax is better than more, but... There are many more important considerations to make first!!! The return and tax aspects become important, after everything else is in place.

For us, the strategy could work with our situation, goals and experience. However, there were many people who likely left the meeting feeling like this was something they "should" do but weren't sure. There would also have been people there who would have participated in the program because of the excitement, but weren't fully aware of all the details. The presenter used great skill to explain the strategy and given the circumstances should have raised some red flags for people hearing the message for the first time: There was a feeling of pressure to act right away, there were some great tax advantages, and the concept would be new and different for most people.

That doesn't mean that the strategy or investment is automatically bad, it simply means that more due diligence is required. In fact, the sort of due diligence that you would perform in making a decision to participate in something new is really the same criteria that needs to be present in all financial decisions. It is so easy to get complacent and comfortable with the same message; therefore, forge ahead because it is familiar – not necessarily because it is right, good, or even appropriate – only because it is familiar.

The point to this example is to learn to become aware of your emotions when making decisions. There are many simple, practical strategies that can be used to make logical, sound, strategic financial decisions. When the emotion is minimized, then you can make decisions confidently and be in a position to take advantage of opportunities that can really make a difference in your financial life!!

Making profitable financial decisions is a learned process, and as your knowledge increases so will the opportunities. Start with the knowledge you have and make a commitment to learn. There are so many resources available – the alternative is to continue to second-guess or struggle financially, when it is absolutely not necessary!!

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