Financial No-Nos That Actually Aren’t
The world of finance and personal money management is almost as full as rumours, half-truths and downright untruths as the average conspiracy theory website. That can make it pretty difficult for young adults (and even older people) to know what to do the best when it comes to looking after their money. That’s why in this post, we’re going to list a few of those financial no-no’s that you know you absolutely must never do that are actually pretty good – or at least not damaging- ideas after all:
Paying Small Debts First
It’s somewhat of a mantra in certain financial circles that you should always pay off your biggest debts first, and technically this is the right way to do it because you will accrue less interest over time. However, studies have shown that people who are able to pay off small debts in full are more motivated to keep paying their debts down and more likely to conquer their debts altogether. So, if you’ve been struggling to pay off your debts because they just seem so unmanageable, perhaps take a break from the big ones and focus on clearing a more manageable debt for a little while.
Having (Lots of) Credit Cards is Bad
Another common financial no-no is the credit card. Many people will tell you that you should avoid applying for credit cards unless you have a very good reason to do so, such as getting a build credit card to help you improve your credit score. They will also tell you that you shouldn’t have more than one or two credit cards max at any time, but that’s also not really true. Sure, if you’re going to max them out, it probably is a bad idea, but since your credit score is partially based on the percentage of debt you are using in regards to your total credit availability having lots of credit cards you never use can actually be to your advantage, especially as the years go by because older credit is even better.
Not Having a Joint Account
This one is controversial because it’s becoming less of a no-no, but there are still many couples who will tell you that as soon as you get into a serious relationship, you should merge your money into one so that you both get the most benefit. However, this can lead to all kinds of arguments, not to mention a perceived lack of agency and such. A much better way to deal with money as a couple is to keep your own accounts and set up an extra account for the both of you which can be used for bills etc., so you get the best of both worlds.
Not Having a Budget
Pretty much any financial advisor will tell you that you need a budget if you want to pay the bills, save for your future and live well in the now and for some people that’s true, However, when you’re young and when you are pretty sensible anyway, it isn’t necessarily needed. This is especially true if having a budget makes you feel that your lifestyle is constrained because you’ll probably go off the deep end and go on a spending spree. Just set up automatic payments for anything important (including savings and retirement) and then do what you like with what’s left over.
Now you know these aren’t no-no’s, will you be changing the way you handle your money?