How to become more rational with your money & avoid these common mistakes
Our relationship with money often feels like a bad romance. We love money (and sometimes hate it), it pulls on our deepest desires - and it makes us do some really stupid things. That’s because the way we handle money is often about as rational (or shall we say, irrational) as a first crush. No matter how much we obsess about it, dream about it, and talk about it with our friends, when it comes to taking action, even smart, savvy women turn into complete ninnies. Don’t believe us? Then perhaps you’ve never made one of these stupid moves with your hard-earned cash...
1) Being cheap - in an effort to save
We’re all for scoring a great deal on groceries or scouring consignment shops to get that designer look for less, but sometimes a desire to save money can go too far – and end up costing you more. Thrifty is cool, but cheap is just, well, cheap, and it isn’t a dirty word for nothing. Whether you skimp on a car that often fails to get you to work, buy bargain shoes that come apart in the rain, or skip going to the dentist because you don’t have coverage, you’re trading the short-term rush of saving a few dollars for expensive consequences down the line. Choosing the cheapest option might make you feel virtuous, but when there could be long-term consequences, it’s really a vice.
2) Assuming you can’t afford to save
There are some people who don’t have a cent to spare once they’ve paid for the essentials (we’re talking about survival here). Surprise, you’re likely not one of them. Chances are that you - like most people - regularly indulge in things you don’t need. Whether you save only a few dollars or a few hundred dollars, saving is as much about motivation as it is about means. That’s why not making a habit of putting some money aside – no matter how little you have – is a stupid move.
3) Putting savings last
Few people indiscriminately spend their paycheques before paying their rent or mortgage, yet this is exactly what most people do when it comes to saving. They get paid, they spend, and they figure if they have anything left at the end of the month, they’ll save it. The problem with this strategy is that failing to plan how you’ll spend your money, you’re ensuring it’ll most likely disappear - and you won’t have a savings account to show for it. If you have any intention of saving (it would be stupid not to), take that money off the top as soon as you get paid. Hoping there’ll be something left at the end of the month just isn’t smart thinking.
4) Turning down free money
Are you skipping out on your employer’s RRSP matching plan because you think you can’t afford it? Stupid move. Yes, the match means that your company will shave a little money off each paycheque, but it also means that you’ll be earning additional tax-free dollars above your regular salary. That means even if you take the money right back out of your RRSP (which, in itself is not a smart move) and pay the taxes and fees, you’ll still be ahead than if you hadn’t taken the match at all. In fact, opting out of an RRSP matching program is a lot like turning down a raise. And you’d never do that, now would you?!
(P.S. The same goes for other programs like RESPs, RDSPs and other government-sponsored programs that encourage and offer incentives for saving.)
5) Paying too much tax
Everyone pays taxes, but the smartest people pay as little as they (legally) can. Accomplishing this usually involves some combination of deductions, tax-sheltered investments and smart money management. An accountant can help you here. Or, you could just give more of your money to the government. Your choice.
6) Failing to have fun
Whether you ramble through every cent you make without having anything to show for it or you hoard it all for a rainy day that never comes, failing to enjoy your spoils is as stupid as it gets. If you’re like most people, you probably have to work pretty hard for your money. But if it never buys you any of the things you want, what’s the point? Taking control and spending conscientiously on the things that matter to you is smart; letting your money run the show is nothing less than foolish.
You’re in control
Just like breaking off a bad relationship, breaking bad money habits is hard work. It means standing up, taking charge and making decisions that ensure that you’re in control of your financial life, not a victim of it. Doing anything less is just plain stupid - and you’re too smart for that.