When it comes to spending your money, there’s a lot more to it than just seeing something and buying it. There’s power in where and how you choose to spend your money, so it’s important to make conscious decisions that align with your financial goals and personal values. In this episode of In The Know: Money with Marsai Martin, host Marsai Martin talks with Margaret Anadu, the Global Head of Sustainability & Impact at Goldman Sachs, about how to spend money wisely.
At Goldman Sachs, Anadu manages about $1-2 billion every year and spends all her time “thinking about how we can use our investments in the world,” whether that be investing in housing, schools, small businesses, or under-served communities.
But you don’t have to be a global investment banking company for your money to make a difference.
“The same way that [Goldman Sachs] invests… I try to spend my own personal money aligned with my values,” explains Anadu. “So I try to support small businesses in my community. I spend money with companies I think share my values, who are making the right decisions around diversity, around the environment. Even very tangible things like being at a restaurant and seeing how they treat their employees. So I think that with every single dollar, you can almost in a way advocate for what you believe in.”
Spending money to make money
Next Martin asks Anadu to break down the commonly heard money mantra, “You have to spend money to make money,” and how it applies to everyday spending.
“You can spend money in a way where it is 100% out the door,” Anadu begins. “Like if you buy a way too expensive dress that you’re never gonna wear. That’s not gonna pay back dividends. But if you’re investing in your education, or you realize in your community you’re gonna need a car to get to school or get to a job, that’s an investment that’s gonna make you money over time.”
Cash vs. credit card
A frequently asked question people have in their personal finance journey—particularly young people and teenagers—is when should they buy something with cash, and when should they buy something with a credit card? To which Anadu has some sage advice.
“You never want to borrow for something that isn’t going to increase in value,” says Anadu. “So if you’re using a credit card to buy [a shirt], and that shirt is $20, and you’re using a credit card to buy it, it doesn’t cost you $20. It costs you $20 plus all of the interest on that credit card. And so that shirt, the second you buy it, it’s going down in value, so why are you letting it cost you more with that interest on that credit card?”
Anadu then explains that buying something that will increase in value over time is a much better thing to purchase with a credit card, like her earlier example of buying a car to get to work.
“Getting to work, that’s gonna drive income for me, that’s gonna drive expertise and experience for me, so maybe I will need to borrow to buy that car, because when I get that car, I’m gonna get that job, and when I get that job, I’m gonna earn more money,” Anadu said.
When cash isn’t an option
With more businesses only accepting electronic money, Martin inquires about what options people should go for when they can’t use cash.
“I think there’s a difference between credit cards, where you’re really borrowing money, and just cards that are your debit card or it’s a card that’s actually just linked to cash you have in your bank account,” says Anadu. “So you can definitely use electronic forms of payment that are still just a way of using cash or the money that you have. Or a lot of people, for example, they’ll use credit cards because they love the points. But they’re paying off that credit card every single month in full so they’re not paying all that interest over time.”
Martin and Anadu round out their conversation with some general spending advice. And Anadu says spending is all about choices.
“You wanna make sure that you’re spending your money in a way that’s investing in your future, that’s gonna somehow make you more money or quite frankly, make you happy,” she explains. “So I think with every single choice, with every single dollar, just say, ‘Is this what I wanna be spending my money on? Is this who I wanna be spending my money with? Is this how I wanna be spending my money?’ Because it’s an important choice. I just think it’s really important for teens to start with that healthy relationship with money from early on and I think that’s just a way to be more thoughtful about it.”
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