It’s expensive out there. Staying at home with a cup of homemade coffee, snuggled under my favourite throw, and reading a long-anticipated book is a cheaper use of my time. And it’s just as satisfying to me as anything I pay for outside my home.
I don’t know about you but it’s expensive to leave my house. Yesterday, it was gassing up my vehicle. Today, it was groceries. Tomorrow, it’s Halloween so there might be last minute run to the grocery store for candy. Later on this week, it’s dinner with a dear friend. Next weekend… sigh… I think you catch my drift.
In terms of problems, this one really doesn’t count. Over the years, I’ve built up some very good habits for my money. I use automatic transfers to fund my emergency accounts and to invest for retirement. Several years ago, I established sinking funds for annual, un-sexy expenses like insurance premiums and property taxes. And lest you think that I don’t have any fun, there’s even a sinking account for travel, gardening, birthday presents, and theatre subscriptions.
So when I say that leaving my house is synonymous with money leaving my wallet, please know that I’m taking care of my priorities before spending on the day-to-day stuff that crops up.
You see, I think it’s the same for everyone. Leaving the house usually means spending money. The world is literally designed for us to spend money everywhere. Vending machines. Coffee shops. Grocery stores. Restaurants. Drive-through windows. Retailers of every stripe. Parking lots & parking meters. It’s hard to get through the day outside of the home without spending a little something somewhere.
Priorities First
Based on my own observation, the trick is to do your saving and investing first. It’s the timeless principle to pay yourself first. You may have heard of it as living below your means. When you get paid, transfer some of your net income – ideally 20% or more – into your saving/emergency/investing account. Once that money is tucked away, you can spend the remaining amount however you want so long as you don’t go into debt.
At the tender age of 16, I got my first part-time job as a cashier in a grocery store. Every two weeks, I took home just over $130. I picked $50 as my “savings amount” and transferred it into a separate account. By the time I bought my first car 5 years later, I had socked away $8,000. (Living with parents who paid for everything helped tremendously.)
If I knew then what I know now, I would’ve embraced public transit sooner and that money would’ve gone into equity investments in the stock market. Oh, well… too late smart.
Bottom line is that I started my first habit – saving a chunk of my paycheque every time I was paid – at a tender age. When I bought my first condo, I really had to figure out where my money was going. It was the first time I realized how badly I needed an emergency fund. If I had to pay for a condo assessment, then I needed to have money set aside or else I would have to go into further debt to cover my portion of the assessment. And when I moved from a condo to a house, I learned that furnaces and hot water tanks and roofs are exactly cheap. Again, my emergency fund got some loving attention.
Tune Up Your Finances
Speaking of your emergency fund, how’s it doing? Do you have atleast 3 months of expenses in there yet? If not, get to work. If yes, then consider beefing it up. Inflation is still something of a concern. I don’t know what’s happening in your corner of the world, but things aren’t getting any less expensive as far as I can tell.
Once your emergency fund is nice and fat, focus on filing your TFSA and your RRSP. Ideally, you’ll max out your contributions every single year. Realistically, that’s not likely to happen. Do what you can to put in as much as you can. Invest your money for long-term growth. When you’re too old to send your body out to work, your TFSA and RRSP will provide the cash you need to live.
And if you’re fortunate enough to be able to max out those two accounts, then open a non-registered account and invest your money. Unlike the TFSA and the RRSP, there is no limit to how much you can invest in your non-registered account. Take advantage of that to earn dividends and capital gains, two forms of income that are taxed less lightly than your paycheque.
I speak from personal experience. It took me years to fine-tune my system, but it’s now running like a well-oiled machine. Between my automatic transfers and my sinking funds, I’m able to fill my TFSA and my RRSP every year. I’m able to send money to my non-registered account from each paycheque. And my emergency fund is nearly fully funded because it takes a very long time to save up a year’s worth of expenses. (Yes – in my view, a fully funded emergency fund is one that will keep me going for a year. You may feel otherwise.)
You Can Do This
So long as you’re investing 20% of your income, or whatever you can realistically afford, then it doesn’t really matter that you spend money every time you leave your home. Just don’t go into debt! If you’re going into debt, then you need to stop. Debt is corrosive to your ability to secure your future. Money that’s going to your creditors is money that it not going towards your financial future.
And I know that 20% is a big chunk of money. You may not be able to save that much right away. Guess what? I don’t care. You start where you are and you work your way up. Ruthlessly cut out whatever you don’t need so that you can save and invest for Future You. No one else is responsible for ensuring that you have the kind of retirement you want for yourself.
So, yes – going out is going to be a hit to your wallet, more often than not. However, if you take care of yourself by investing off the top and by keeping your emergency fund healthy, then those hits won’t matter. The money that’s working for Future You will keep doing its job, regardless of the day to day expenditures.