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Fresh Takes on Money Management

Uncategorized Oct 17, 2023

We're seeing all of this “girl math” content online and as two math girls… we're on the fence. First of all, even as accountants 🤓 we can see the humour in women justifying the purchase of a purse as free if every time she wears it she doesn't buy a coffee… or that, if you return something to a store, you actually made money. Cute, funny. What's neither charming nor amusing, however, is glamourizing careless money management.

We won't dig into broader discussions about stereotypes, but we do want to highlight certain money management approaches that may not work in your favour and can even be damaging to your finances.

Before we dive in, it's important to clarify that we're not here to judge anyone who's realized, after the fact, that they've made a less-than-wise financial decision. We've all been there! Managing money is challenging and we learn through trial and error. However, similar to personal growth, becoming aware of our thought processes can greatly benefit us.

Now, let's explore five less-than-ideal money mindsets and learn how to shift our perspective:

Compartmentalizing Money
Compartmentalizing money happens when you treat unexpected income, like a sudden sales spike or getting a big contract, separately from your regular finances. You might view it as a bonus and spend it without considering your usual expenses, overall goals, and financial plans.

Compartmentalization happens with business money and personal money alike. Imagine getting a surprise $200. It might be tempting to see it as a reason for a fancy dinner out, but considering it part of your overall budget, without influencing spontaneous spending, might be the smarter play in your financial journey.

Getting Deals
Buying something just because it's on sale might seem like a great deal, but it's not always a wise choice. Sometimes, we end up spending money on items we don't really need, just because they seem cheaper. If you've ever been to Winners 🙋🏼‍♀️, you know exactly what we mean.

It's essential to think carefully about whether the discounted item is something you genuinely need or will use in the long run, rather than getting lured by the price cut and the urgency of the sale ending.

Spending to Save on Taxes
Spending money to save on taxes might sound like a savvy business move, but it can be a bit like chasing your tail. When you spend more than you need to in order to lower your taxes, you end up with less money overall. This is particularly true when you finance assets (like a vehicle or equipment) to write off. You might get great tax savings this year but you're left paying the debt for years to come.

It's smarter to look for legitimate ways to reduce your tax bill without spending excessively, like taking deductions or credits you're eligible for. That way, you can keep more of your money without making unnecessary purchases.

Budgeting by the Month
Thinking about your yearly budget, not just what you can afford monthly, gives you a more complete view of your finances. This matters because certain costs, like monthly subscriptions, might look affordable when you think about them as a monthly cost. Sure, you can afford an extra $65/month. But when you add up what you'll pay in a year, it can be more than you realize. That $65 monthly is actually $780 annually and seriously cutting into your take home pay!

Not considering the whole year's cost might lead you to spend more than you should, making it harder to save or spend on other important things. So, keeping an eye on how these smaller expenses add up over time helps you make better financial choices.

Sunk Costs
When it comes to business, the sunk cost fallacy can be a real stumbling block. We've all been there, investing time, money, and resources into a project or strategy that isn't delivering the expected results. It's easy to feel like we should keep going just because we've already put so much into it. The reality is, continuing to pour resources into something that isn't working just means you are spending more money or time needlessly.

The key is to recognize when it's time to cut your losses. It's not about admitting defeat; it's about making financially sound decisions that will benefit our business in the long run.

Final Thought
We all encounter less-than-ideal money situations, but recognizing and improving them is the key to a more secure financial future. So, as we think about our money mindsets, let's aim for informed choices that better serve our financial goals. By being aware of these less-than-ideal money mindsets and striving for financial wisdom, we can look forward to a brighter and more secure financial future—no girl math required!

Interested in learning more from us? Follow along with us through our social media accounts (find us on Instagram @growcpa) and sign up for our newsletter for more educational and fun financial content.

Wishing you success in your business,

- Martina + Ashli

 

Date published: October 17 2023

Disclaimer - The information provided in this blog is general in nature and solely for educational purposes. Readers use and implementation of the information comes at their own risk and is their own responsibility.

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