Actually, I have some controversial ideas about a lot of things, but since we’re talking about money here, that’s all I’ll share. For today.
To be fair, it’s possible that the thoughts I’m about to share aren’t controversial – they could just be straight-up wrong. And I hope you’ll tell me if they are. I need you all to keep me in line 🙂
I might be nuts, but……
1. I think it’s good to get a tax refund.
This idea rests on one really important point: if you use your tax refund for something productive – like paying off debt or saving – I really think that getting a tax refund is a good thing for most people. Why? Because most people aren’t very disciplined with their money.
I’ll use myself as an example: I recently increased my federal withholding to the tune of about $40 per paycheck. I get 26 paychecks in a year, so that adds up to just over $1,000 per year I’ll be paying extra in taxes this year. Assuming that I get all that money back next year at tax time (I won’t) and that I throw that $1,000 into savings, I think I’ve done a really great thing for my finances.
Why? I’ve basically just given the government an interest-free loan. I could have invested that $80 per month and ended up with a lot more than $1,000 at the end of the year. But I know myself and I know that there’s no way, over the course of an entire year, that I would be disciplined enough to actually save or invest that money. It’s better if I just never see the money then get it back in one lump sum to put directly into savings.
2. Renting isn’t throwing money away
I think buying a home is a great thing. For some people. People who can afford the mortgage and the upkeep and the utilities while still paying for all of their other expenses, including saving for retirement.
There are not a lot of those people in my part of the country. Most people who live on the coasts and who are under 30 just can’t afford to buy yet. But they feel pressured to because interest rates are low, houses are selling for a bargain, and, don’t you know, “renting is just throwing money away.” So they end up buying when they really shouldn’t be.
But I disagree – I don’t see anything wrong with renting. In fact, there are a lot of great things about renting: in most cases it’s cheaper than buying on a monthly basis, there’s no need to worry about maintenance or upkeep, and there’s no long-term commitment to a particular place. I do want to be a homeowner some day, but not until I’m really, really ready.
3. Plan only for the near future.
I’m not a big believer in super-long term planning when it comes to my finances. At least, not yet. In ten or twenty years maybe I’ll feel more comfortable making a five or ten-year plan, but not right now. Why?
It seems pointless.
There are so many variables. Career changes, relationship changes, having children, aging parents – all of these are completely unpredictable at this stage of my life and all can have major financial implications. It doesn’t seem practical to lay out a very detailed, long-term plan that could just go up in smoke in a moment. Yeah, yeah, at any time in my life any plan could go up in smoke. But I think your twenties (and probably early thirties) are especially full of upheaval.
So for right now I’m planning for the near-ish term and putting in place some financial “best-practices” that will serve me well no matter what the future holds, like saving as much as I can and staying out of debt.
So, do you think I’m crazy? Do you have any controversial ideas about money?