Finance – Common Money Dilemmas: How To Solve Them
Some money problems are easy to solve. Like, if you’re carrying a balance on your credit card, you should aim to get rid of it.
But sometimes the answer isn’t as clear and we’re faced with a money dilemma. Two choices that seem equal, but aren’t. In other words, a money dilemma is when there’s a few ways to spend your cash, but it isn’t clear which one makes the most financial sense. Here are some of the most common money dilemmas.
Renovate or move
Growing families often wonder if it makes sense to renovate and stay or move to another home. By staying put you save money on moving costs, property transfer taxes, realtor fees and general cost of packing up a home. Staying also means you keep the friends and family and the community groups around you. But remaining in your current home means a huge renovation budget. On the other hand, if moving to a new home, means upgrading your area, it might make more sense. A better area, means easier access to transit, better schools, more amenities like libraries and community centres, grocery stores and hospitals. Solve this money dilemma by figuring out which decision will enrich your life more.
What debt to pay first
If (for example) you’re in both student debt and credit line debt the money dilemma is what to pay first. Solve this by knowing which loan is costing you the most. If you’re student debt is more expensive, see if you can consolidate your loans into one lower interest payment. This will simplify your installments and get your loans paid down faster. Solve this money dilemma by seeing which loan costs less.
Home values in Canada have risen dramatically and many are lucky to have considerable equity in their home. If you want to tap that, the main choices are a secured line of credit or refinance. If you want to borrow a set amount right away, than refinancing will work out cheaper for you. But if you want to borrow in the future, but you don’t know how much, a secured line of credit is the best option. In this case, don’t be concerned with the lowest interest rate. Solve this money dilemma by figuring out the loan that will cost you less in interest payments overall.
Used or new car
It’s no secret that a new car loses value quickly. According to Edmunds, a consumer website for car seekers and owners, in the first year you lose 19 per cent of the value. There are also added fees, like delivery charges and higher taxes. But if you’re keeping that car for its life, so around 10 years, you will know the history of that car. For example the maintenance record. These are things you sometimes have to guess when buying a used car. Solve this money dilemma by first figuring out how long you want to keep the car.
Big annual holiday or a few shorter trips
In this case, you need to weigh your family and work life. For some families, going away any other time than the summer is not possible. So you save up all your holidays and take off for a few weeks then. For others, smaller trips off-season are easier and often cheaper. You may work for a company that has some obvious downtime. Solve this money dilemma by looking at your family’s schedules and see which option will serve you better.
A money dilemma is different than a money choice. We make financial choices every day, some good and some bad. A dilemma is when what you want to do costs the same, but you can’t figure out which makes most sense.
RUBINA AHMED-HAQ is the Finance Editor for HPG. You can read her musings in Condo Life and Active Life. She’s also the Family Finance Advisor for PC Financial. She regularly contributes on TV and radio including CBC Radio, CBC News Network and Global News Toronto. Follow her @alwaysavemoney