BY FAZAAD BACCHUS
You may have heard that money is meant to be spent, what you haven’t heard is that it is meant to be spent wisely and definitely what we don’t hear is that money is meant to be saved. Yet this is the reason that Canada’s household debt is at an all time high, spending, spending and more spending. Why the need to be a compulsive spender, to show that we can afford things or to keep up with the Joneses? When we earn money, don’t we exchange precious time to earn that money and doesn’t it mean that we are giving more time to our jobs so that we could have more money to spend? The value of the thing that we purchase then, is weighed against the time we exchanged to acquire it.
Let’s talk about some mistakes we make with our money:
We tend to spend in relation to what we earn, that means our expenses increase according to our incomes. This is because most people do not have a spending plan or a proper budget that they stick to. Lacking a budget is a surefire way to have your spending go out of whack. The solution is simple “If I didn’t budget for it then it will have to wait”. A good recommendation is to balance your budget this way:
50 % for our essential needs (mortgage, utilities, transportation etc).
30 % for our discretionary expenses (dining out, vacation travel, shopping etc)
20% for our financial goals (children’s education, retirement planning, debts etc).
We spend first and save what is left, typically we save what is left over after we have paid all our bills. And usually that is if anything is left over! The way to combat this issue to save first then spend after, if you try to save at least 10% of your net income before paying off expenses and you cannot balance your budget, then it forces you to look at the expense and make adjustments accordingly.
We buy things that depreciate too quickly. There was a time when you bought a television or a car for example and it would last you for many years. That time is gone. Today, models are ever so increasing that the need to be in the game is too tempting. So we get tempted and away goes our money on depreciating assets. Why do we have to buy new when it becomes used the next day? Try to put your money where it grows not where it goes.
We don’t discuss money at a family level. My money is my money and your money is your money – this is such a big mistake in families. Discussion needs to take place at the kitchen table about money matters, about who is earning how much, how are bills to be paid and how much should they save as a family. Many marriages fail through because of money, not because there wasn’t enough but because by the time they started to discuss it, it was already too late and into argument phase.
Not having fun with your money. Money is meant as a means to an end, it gives comfort, security, and sometimes it even gives up peace of mind. But money should also bring joy to our lives, what’s the point of saving all our money for a time that may never come; such is dilemma we are faced with.
Life is about balance; enjoy your money today without overspending. Save for emergencies and hope they never come. Take trips every year and make life memorable. Save for your retirement so that charity does not become necessary.
Do talk to your advisor about helping you rearrange your finances for a more balanced and a better life.