Canadian Finance Blog

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Challenging Personal Finance Assumptions Posted: 17 Nov 2010 02:00 AM PST I clearly remember when I was a child and I got my piggy bank. It was a wooden duck with glass sides, so that you could see the coins as they collected. When my parents gave it to me, it was around the same time that I started to get an allowance. They taught me to take 10% of my allowance and give it to the church, and to take another 10% and put it away in my piggy bank as savings. Eventually we took that piggy bank money and put it into my first bank account. My parents taught me a lot about money when I was growing up, but they didn’t teach me everything. Along the way, I’ve learned on my own how I should take care of my money and what big financial decisions to make. Most likely, you are in a similar situation, where you have knowledge regarding your personal finances that you may not even remember where it came from, just that it is the “best” way to do something, and that’s the way that you’ve always done it. However, have you ever stopped and considered that your initial thoughts and reactions might be wrong? What if what you are assuming to be the best way, is actually not the best? What if what you know to be true is not actually true? So you have two options. You can either choose to ignore the fact that your assumptions might be wrong, and continue to live and spend as you always have. This is perfectly fine solution. Or, you can start to challenge yourself and your assumptions to see if you can perhaps save some more money. Personally, because I am recently married, I’ve found that a lot of my assumptions have been challenged simply by having a different opinion from my wife. She was raised with one assumption, and I was raised with another, so we’ve naturally had to come to terms with one of us being “right” or “wrong”, and figuring out how best to compromise and proceed. So if you have the option of involving a significant other in your financial decisions, you will quickly find that a lot of your assumptions – ones that you didn’t even know existed – will be up for debate. If you don’t have the option of involving someone else, or if you’ve been married for so long that you and your partner might as well be the same person, then you’re going to have to rely on your own will power to force yourself to realize when you might be making an assumption, and then following through on determining if you are correct or not. This could be something as simple as quickly searching google for the answer, or as complicated as setting up an appointment with your bank. So what sort of things might you be assuming about how to handle your personal finances? How about leasing verses buying a car. Does it make a different if it is for your home business? What about renting or buying a home? Does it depend on whether you have a down payment or not? What about your age? If you are investing, is it better to invest aggressively or passively? What might it depend on? Where are the cheapest groceries in your city? Does that include the extra distance driving? Do you have the home insurance that you need, or that you were told that you needed? All of these questions might have a simple answer – but is it a simple answer because it is true, or because you assume it to be true? Have you done the research yourself? Could it have changed over the years? Perhaps it is time to stop assuming you know what is best for you financially, and to do the hard work required to find out for sure. It could save you tons of money, and it could be worth the effort. Related Posts: Recommended Personal Finance Books Avoiding Fees Is Smart Finance New Year’s Resolutions For Your Personal Finances Challenging Personal Finance Assumptions originally appeared on Canadian Finance Blog on November 17, 2010.

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