The internet is a very vast, and information filled spaced with a ton of financial advice, and you can easily get lost in it all and miss the basics. Here is a brief, yet straightforward look at the changes you can make that will lead you on the path to financial happiness.
House
For generations upon generations home ownership has been THE sign of accomplishment. The general public perception is that owning a big house is the best investment you can make in your lifetime. While not completely untrue, owning TOO much house is really not the best investment. Owning a house is often better than paying rent since you will have something tangible to sell in the future. But what happens often is that people are approved for mortgages that have payments far beyond what they can afford and making those payments takes up most of your income.
You also need to consider how long you plan on living in that house before you buy it. The transaction costs of real estate agents and mortgage fees may actually leave you losing money after the sale of your home, even if the market has gone up since you bought it.
Car
Commuting to work can be a serious time and energy drain while you’re idling in traffic. It’s understandable that you want to be comfortable for your commute and save some time by taking your own car, but the downside is that cars are a horrible investment. As soon as you drive a brand new car away from a dealership you lose money. Not to mention, the purchase of the vehicle is not the only fee associated with car ownership. Insurance, fuel, tire maintenance, license plates, oil changes and never ending maintenance leave you with needing a significant budget for your vehicle. Research says that people end up spending more on their vehicle costs in their lifetime than they have saved for retirement.
Choose a practical vehicle that fits your budget, and though it is very difficult to do in much of the city, getting rid of your vehicle entirely will save you a good chunk of change.
Little Things
Coffee. In the working person’s world, this elixir of life and productivity can really be a leak in your finances. While not a large up-front cost, over time these little $5 coffees in the morning everyday can take a toll on your savings. On average Canadians spend approximately $2000 a year on coffee. $2000 a year going into your savings for retirement or your child’s college fund is a big deal. Don’t let this opportunity pass you by, and consider brewing your own in the morning to cut that cost by 80%!
Bottled Water. When you’re always on the go and rushing around to get things done, buying bottled water can be one of those convenience items that you reach for. Paying on average $2 for a bottle of water, you are doubling your coffee expenditure and cutting into even more of your retirement fund.
Eating Out. We all need to eat and sometimes buying groceries is just such a pain. It may not be practical to home-make every meal and tote your left overs into the office for lunch, but cutting down on how much you do eat out can really make a difference in your spending.
My Point
While some of these things seem like inescapable needs, give yourself a reality check. Do I really need that fancy car? Or can I purchase a more generic car with all of the same features for half the price? Do I need to stop and pick up a latte and pastry? Or can I make a coffee when I get to work?
Consider what is most important to you and keep your eye on the prize. You will thank yourself later!