Many people tend to have a very black-and-white approach to managing their money.
For instance, splurging on lattes every day is bad, but bringing lunch from home to work is good.
But of course, as in life, not every financial decision can be categorized so simply. Depending on your financial goals, some things that you might think are total money management don’ts could actually do you a lot of good in the long run.
To get more insight, National Bank helped us connect with finance expert Richard Goldhar, founder of Goldhar & Associates, to share some of his tips for how young professionals can look at common financial decisions differently in order to make better choices.
Here’s his advice:
1. Stop treating your credit and debit card equally
Every time you make a purchase, you make a financial decision. Will you swipe your bank debit card, put it on a credit card, or put down cold hard cash?
Choosing cash or your debit card mean you are using your own money. Your debit card is just as convenient as a credit card, but unlike a credit card, it taps directly into your own money in your bank account. There is no “second” bill to pay 30 days later, and no interest adding up on the purchase. Additionally, cash can be elusive. As in, “where did that $20 go?” When you can see where you spent it, you’re more in control.
For everyday purchases, such as transit fares, gas for the car, coffee at Starbucks and groceries, using your debit card is a wise choice. Save the credit card for travel and large ticket items such as car repairs, home repairs, and home appliances.
2. Stop seeing all debt as “bad”
Few of us can acquire a home without borrowing. A mortgage is considered good debt because it allows you to acquire an asset that likely will grow in value more quickly than the cost of the borrowing. On paper, it may be less costly to rent, and you won’t have to borrow long-term to sign a lease, but don’t discount the emotional benefit of taking the plunge to buy.
Beyond the asset appreciation, a home gives you roots and a stake in your future. It may take 20 years or more to pay off the mortgage, but every year, a larger part of it is yours. That pride of ownership is beyond price. Long-term, owning your home may be far more rewarding than a flashy car, a designer wardrobe, or world travel. Consider your lifestyle and life goals, of course. But homeownership is one of the few instances where there’s genuine merit in borrowing today for long-term gain.
3. Start thinking of your credit card as a personal loan from yourself
Your credit card is a revolving loan from the bank. But if every time you use the card you think of it as a loan to yourself, then there’s an immediate personal benefit in paying back the spend as quickly as possible. You’ll also have a different perspective on buying those new boots. Are they worth taking out a loan? Will you be able to pay back the loan in 30 days? If not, is the purchase worth the extra cost of paying interest on the loan? When you’re using money that is not your own, it’s never a bad idea to rethink the purchase before you commit to it.
National Bank is inspired by the freedom to decide: Your own styles, actions, and paths. We believe in better alternatives to the norms. This could be your finances, dwellings, careers, travels, any and all undertakings. National Bank’s purpose is to help you power ideas that can change your life and change the world. Check out tips & tricks the alt way here.