There is no way around it. You should always be saving money – some way, some how. Life is expensive, and it only gets more so. Name one essential thing in your life that has gotten cheaper over the years. Food? Nope. Rent or housing costs? No! Gasoline? Not a chance. Utilities? Not a bit. Transit? Slower increases but increases all the same.
Even if you have a fixed mortgage on your home, the cost of borrowing money will go up when you renew. The central banks are on a tear because they want to get inflation under control. That means mortgages are more expensive. Even with a fixed mortgage, the other costs of home ownership have gone up over the years.
While it’s important to live in the present, I would argue that you owe it to yourself to resist the incessant urging of the AdMan and his trusty sidekick, the Creditor, to always be buying. You need to save money for Tomorrow, and there’s a good chance that you don’t know exactly how much you’ll need.
For example, if you own a house, then you should definitely be saving. At some point, your house will need an expensive repair or costly maintenance. It could be a new furnace, a new hot water heater, new windows, new roof, or a new foundation. It’s unlikely you’ll be able to buy another of those things for less than $100. And while a new hot water heater doesn’t cost nearly as much as a new roof, it’s best that you have the cash-money on hand to buy it outright. Your water heater should not be the reason you’re paying interest on your credit card.
And while a new roof is likely going to run you 5-figures, the same principle applies. Start saving money now so that you have the cash in place in 10-15-20 years when you’ll need to replace your roof. Much like successfully saving for retirement, owning a home requires long-term financial planning. I love my home but I’m the first to tell everyone that it’s a money pit.
Saving for retirement should be obvious. Your bills won’t disappear until you die. In other words, you may have parted ways with your employer but don’t assume that means that your bills will have parted ways with you. Whether 25, 45, 65 or 85, you’ll still need to eat and have shelter. Society still demands that you be clothed. No matter how old you become, you will need money for the basics.
You need to invest today so that Tomorrow You will be okay financially. Remember that most people don’t have pensions, i.e. their employers are not saving for them. It’s up to you to save and invest. For those few who do have pensions, there’s a chance that your pension is not indexed to inflation. This means that your employer will pay you a fixed amount when you retire, but that amount will never go up since it is not indexed to inflation. Prices will continue to increase but your pension amount will be set in stone until you die. This is not a good situation to be in if your retirement is going to last a long time. And since very few us know our expiry date in advance, it’s best that you start investing your money ASAP and ensure that your portfolio mix is built for growth.
Maybe you own your vehicle. You should definitely be saving. Oil changes, brakes, tune-ups, various repairs, insurance, registration – all of these things cost money. Ideally, you’ll pay cash for your car. And if you can’t pay cash, then pick the least expensive vehicle you can find that will do the job so that your financing costs are as low as possible. Once your loan is done, continue to pay that loan amount into your Next Car Fund. When the wheels fall off your current vehicle, hopefully you will have enough in your Next Car Fund to pay cash. Then repeat the cycle. This method works best if you can get 5 years or more between vehicle purchases.
Do you have loved ones with whom you like to celebrate things? Are they the people you call when you want to do things? Concerts? Sports games? Picnics? Wine tastings? Movies? If the answer is yes, then you should have some fun-money set aside for those times together. It doesn’t have to be a lot, but every paycheque should see $40-$50 going towards these outings. Life is better when it’s shared with those we love. And while there are free things that you can share with loved ones, there are also times when you might want to spend a little bit of money on them too.
One of the very best benefits of always saving your money is that you can live in a state of debt freedom. Your entire paycheque, after taxes, is completely yours. You need not send any of your hard-earned money to a creditor for a purchase made in the past. You get to keep your money! This is an exceptionally good thing considering how hard you’ve worked for it.
So just remember to always be saving. Whatever it is that you want, try to save for it in advance then pay cash. You won’t ever regret depriving your creditors of interest payments. Trust me on this one!