Simple Strategies to Help You Win When Managing Your Money

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When you own your own business, there are many financial perks. You can save a lot on taxes (great write-offs and deductions) and you have a lot of say in how much money you can make and where you spend it.

This kind of freedom can also bring too many options and it can sometimes feel a bit overwhelming trying to decide what the best choices are for you, your business, and your family. Even seasoned entrepreneurs get stuck trying to decide if they should save or spend, rent or buy, lease or own.

Here are some of the most common questions we face, and ideas that can help you decide which are the best options for you in each of these areas:

Should you buy or rent a home? In most cases it makes more sense to buy because a home will appreciate over time, which can become a very valuable asset in the years to come. Unless you’re a highly disciplined saver and investor, you won’t come out ahead renting.

Should I hire a realtor or sell my home privately? That really depends on how much work you want to do yourself. A realtor has the local market experience to help you competitively price and stage your home. You’re also more likely to sell it faster using a realtor.

On the other hand, you can save thousands of dollars in commissions selling the house yourself. If you have the time you’re better off not hiring a realtor. But for a lot of us, time is money. In that case hire a professional.

Should I buy or lease a car? Since leases are generally between two and four years, the vehicles are almost always going to be fully covered by warranties and driving them should be problem-free. Once the lease is up, you get to trade in your car for the latest model. You can keep up with the Joneses.

On the flip side, if you took out a five-year loan to purchase the car outright, your monthly payments would stop after five years. It would be only a matter of time before the break-even point was reached. So, as usual, there is a tradeoff: With leasing, you will pay a premium over your lifetime in exchange for a lower monthly payment and very few concerns about reliability. With an outright purchase, you’re going to come out ahead if you can commit to proper maintenance and resist the urge to constantly upgrade.

Should I pay off debt or invest? When you receive some extra money it may be difficult to determine whether you should invest the funds or use them to pay towards debt. Of course paying off high-interest consumer credit first is a no-brainer. It gets tricky with lower-interest debt like a mortgage.

Financial theory recommends that if your after-tax return on investments is greater than your after-tax cost of debt then you should invest. Long story short, academic studies show you’re better off investing money in a tax-advantaged account (like a 401k or RRSP) rather than paying off your mortgage early.

Should I save for retirement or my kids’ education first? Good parents will do anything for their kids. But that selfless attitude should fall short when it comes to choosing retirement over your kids’ college fund.  A recent survey from MassMutual showed that the vast majority of family financial decision makers said that paying for their kids’ education ranked far above saving for future medical expenses or retirement. And for those good intentions, only three in 10 American parents are confident they are adequately preparing themselves financially for retirement.

One thing to remember, you can always get a loan or scholarship for college, you can’t get a loan for retirement. The danger of running out of money before you die is very real. Besides, the biggest financial gift parents can give their kids is not to pay for their college, but for themselves to be financially secure and independent, so that they don’t run out of money and become a burden for their children later in life.

When the time comes to decide between renting or leasing, investing or paying off debt, and where to put your savings we recommend running the numbers and removing the emotion. If you get stuck it’s best to consult with a professional financial advisor who has your bottom-line in mind.