7 things that seem wrong but are actually right in personal spending

There are things that many people think should not be applied in personal spending but actually should be done.

In daily spending, there are things that seem to be avoided but in reality are not as bad as we think. Following the stereotypes about spending is sometimes not a safe choice but has the opposite effect.

1. Pay off small debts before paying off large debts

While most people think paying off large, high-interest debts first is a priority, a study from Harvard Business Review suggests otherwise.

When looking at the numbers, the smartest thing to do is pay off the debts with the highest interest rates first to minimize the amount of interest you pay and avoid getting into a situation where old debt begets new debt.

Paying off small debts first helps you stay motivated and gives you the feeling that you are making progress.

However, Harvard Business Review researchers concluded after a series of experiments that seeing small debts being paid off made test participants feel encouraged and motivated to pay off their debts, leading to paying off their debts sooner.

"Focusing on paying off the smallest debts first gives the debtor the feeling that the payment is being made in a systematic and progressive manner, thereby giving him more motivation to pay off the remaining debt," wrote Remi Trudel, a researcher at Harvard Business Review.

Personal finance expert Derek Sall also supports this method and has used it himself to successfully pay off multiple debts totaling around $100,000.

2. Separate finances from your partner

One of the most important issues couples often have to address is finances. How is your partner financially healthy? Is he or she in debt? How much do they save? Are they investing? These are important questions for couples deciding whether to pool their finances, but it’s not always a good idea to join forces.

It's perfectly normal for a couple to not use a joint account, as long as you're transparent about your finances with your partner.

According to some reports, there are many situations where it is better to separate finances from your partner, such as when one person is more financially savvy than the other or there is not enough financial trust between the two parties.

Some financial experts also suggest a "me, you and us" model for couples, where the joint account is used only for living expenses.

3. Rent instead of buying

Many financial experts have pointed out the long-term benefits of buying a home, but don't think renting is a waste of money.

"I think renting is especially suitable for young people," said wealth management expert Ben Carlson.

"When you are young, renting a house gives you more choices. You will not be tied down to where you live and are completely free to choose a job anywhere you want. Many people compare renting a house with buying a house on installments, but in my opinion, buying a house on installments is not as easy as you think."

The choice of renting or buying depends on the real estate market price where you want to live. Renting will help you avoid taxes, maintenance fees, and mortgage interest. Whether you decide to rent or buy, only make the decision when your monthly payment is less than 30% of your income.

4. Borrow more debt

Everyone is not excited when they hear about debt because no one wants to owe others. However, there are two cases where you should consider taking out a loan to get ahead: Loans for education and loans for buying a house.

"Student loans and educational loans often have affordable interest rates and are sometimes deferred for reasonable reasons. In addition, investing in education will help you improve your income and pay off debt over time," according to financial experts from Motley Fool's.

Besides, if the home loan packages have reasonable interest rates and the monthly installments are less than 30% of your income, you can definitely consider taking out a home loan. A reasonable home loan will bring many long-term benefits.

Investing in education is the right thing to do, even if it means taking out loans.

5. Open multiple credit cards

Many people still think that having multiple credit cards in your wallet is a reckless spender. However, this is a smart choice, as long as you pay off the balance in full each month.

According to credit expert John Ulzheimer, the more credit cards you use, the better your credit score will be. "You should keep your credit spending at 50% of your maximum, preferably 30%, but ideally 10%."

If you only need to spend $1,000 a month while your card has a limit of $6,000, you should still open another card to split the spending to the remaining card.

“The further away from your credit limit you spend, the better your credit score,” Ulzheimer asserts.

6. Spending without limits

Setting spending limits is helpful for many people, especially those who are big spenders. However, this method is not suitable for everyone.

Self-made millionaire David Bach shares, "There are people who try spending within their budget for two or three months and then give up because their personality doesn't suit the method."

Bach compares budgeting to dieting and exercise: If you don't enjoy it, you're more likely to give it up. But even if you're not a budget-conscious person, you should still track your spending using a free mobile app or website.

In addition, you should also try the "Spend on yourself first" method by spending money on investments, closing your salary fund and creating emergency savings first instead of paying bills and buying necessities. This method ensures that you have separated about 20% of your income from monthly expenses.

7. Invest even if you are not an "investor"

It may sound risky, but investing is something anyone can do. You don't need to be a stock-picking genius or have a "huge" income to make long-term profits from investing.

According to many investment experts, the best way for people with no knowledge of investing is to put their money in trust funds. These are entities that hold large, diversified stocks and charge relatively low fees.

If you want to make a long-term profit, you should invest in a certain market, even if it is a high-risk market, instead of letting your money "die" without investing./.

According to VOV