If you ever talk to anyone about their current financial situation, there are often a number of things that come up as first on the list in terms of headaches and expenses. These are often necessities, things we simply can”t afford not to pay for because they are essential to our survival. Unfortunately this is often the area in which we overpay, or stretch our finances to the limit to acquire. After all, we reason, we”re going to be living in this house/driving this car for a long time, why not splurge? Because it”s detrimental to your financial health that”s why!
Here”s a list of some of the biggest expenses we have in our lifetimes, and also the ones we tend to go furthest into debt for:
1. House
There are so many articles on the banes/blessings of buying a house that I couldn”t possibly cover them as well as other bloggers out there have, like , as an example. Many people mistakenly assume that as long as they pay off their house, retirement saving isn”t nearly as important because they have that equity to tap. Others purposely stretch themselves to get the biggest house they could ever afford, often with catastrophic consequences. If you are looking to purchase a home, err on the side of caution. Do vigorous and exhaustive research on the property you are looking to purchase.
After all, you are likely taking on a loan that you will be paying off for much of your life, on average about 3 decades. The importance of research is something I shouldn”t have to mention, but will for the sake of completeness. As for myself, I won”t be buying a home anytime soon. I”ve teetered to both sides, but right now I”m living in an apartment very close to my job and at a very comfortable cost per month. Find out what works for you and stick with it, but minimize your mortgage if at all possible. The less debt you have, the sooner you hit financial independence, and that includes a mortgage!
2. Car
Cars have to be one of the biggest money pits ever created. Unfortunately for us they are also a requirement.Sure if you happen to live in an urban area where everything is within walking distance, you can do without. Otherwise, you”ll need a car to get to and from work, if nothing else. When choosing a car, understand that it is what it is, transportation. You don”t need a sirius radio and leather seats and anything you can”t take out of the car. As soon as you drive it off the lot it starts to bleed money. Luxury is not well spent on a car, because in the end it all ends up in the scrap heap. Function over form, at all times.
3. Food
This is a tough one for me because I maintain a healthy diet and so don”t buy too much of the inexpensive processed foods. I also eat a serving of vegetables and at least one piece of fruit everyday. As such I spend about 40$ per week for my food shopping. Not eating out all the time is key to your food budget, so reign in all those weekend trips to your local pizza place, even if they have some of the best strombolis ever made (yum.)
Keeping your monthly expenses down is equally if not more important than saving and investing. Take the essentials of your life and tone down their cost wherever possible. When you can live on less, money isn”t nearly as important.
-Xias