My Story: Reaching Financial Goals
contributed by Julie
My Story: Achieving Financial Goals
Setting Monetary Goals
So you want to live well on your current income, save a little money and have fewer or no debts? Sorry, I can't tell you how to reach these goals. What I can tell you is how my family has reached these financial goals.
My family is a fairly typical Canadian family with an income that has steadily increased over the years. Our expenses have gone up with every increase in income and we have just recently bought a new home. I would say that we have difficulty saving money, that we are also stumped by irregular, unexpected expenses such as car repairs and that we are constantly looking for money to fund our retirement funds. Yet every year, we somehow scrape together the cash to meet our needs. How do we do this? These are our family secrets.
- We have one credit card (PC MasterCard) that we pay off in full every month. I hate paying for using credit and I am not interested in making my financial institution any richer than it already is. So that credit card bill gets paid first and on time. I make sure that all purchases are on this credit card (simplifies budget keeping) and I use the PC points I earn using this credit card to lower my grocery bill.
- Before taking on a new debt, I make sure all other debts are paid. We have just bought a new house, but before we took this step of incurring new debt, we paid off our student loans, retired the mortgage on a rental property and made renovations on that rental property. We saved the 25% down payment for the new house so we do not have to pay for mortgage insurance. In addition, this simple precaution will enable us to retire our mortgage earlier and save us a lot of moolah in interest payments. We plan to pay off the mortgage on the new house as rapidly as we can. As I said before, paying for interest on a loan is bad and paying that interest for the maximum life of a loan is voluntary slavery to a bank.
- We made sure that the mortgage payments for the new house could be covered by my husband's salary alone. I shopped around for the lowest mortgage rate I could find and I locked in for a 5-year term. I determined what the insurance and property tax costs would be and wrote these expenses into our budget.
- Our grocery bill is high, but I accept this. We buy large quantities of fresh fruits and vegetables. We limit our meat intake to eggs, chicken and fish products. I usually make all meals from scratch. We do not buy cleaning products (vinegar is wonderful) and our dishwashing liquid has many uses. Our clothes are washed in cold water using a detergent such as Tide. Our cosmetic costs boil down to soap, shampoo, toothpaste, dental floss and toothbrushes.
- We do not eat out very often; my kids go to a fast food place once or twice a month. Eating out makes a significant dent in our salary; our kids know that we just can't afford to eat "fancy."
- We turn down the heat when we are out of the house and watch our water consumption. In the summer, we water our garden with rainwater collected in barrels.
- We never buy our clothes, dishes, furniture, toys and books retail. Everything is bought secondhand from garage sales or thrift stores. We donate whatever we don't use to Goodwill so that someone else and the environment can benefit from this recycling process.
- We do not have a television set although we do have computers and books all over the place. A television set is just a marketing tool used to sell useless things; it has no place in our home. We have enough useless stuff cluttering our home as it is!
- Birthday parties have been downscaled; we no longer go to West Edmonton Mall or special party places. We have small parties in our home. Birthday presents have similarly been downscaled. Each birthday child receives a gift of exactly $20; most kids are thrilled to receive money and spend that cash in a way that pleases them.
- We drive only one car and we use it only for driving the kids to school or to swimming lessons. My husband takes the bus to work. This saves on car insurance costs, which, as we all know, are astronomical.
- The kids only have one special activity after school. The older boy is enrolled in a swimming club where he swims four times a week. The younger boy is in swimming lessons twice a week and will also be enrolled in the swimming club when he is older. The costs for the swimming club are high but necessary; the return on this investment will be favorable. When the boys are older, they will be able to earn extra money as swimming instructors or lifeguards. This, in turn, will defray the costs of their university education.
- We are disciplined savers. We saved when we were graduate students living on $12,000 a year and we save now when we are living on a single salary and rental income. We believe in INSIDA (incremental savings into designated accounts). We have four accounts: one for bills, a second one for the children's educational funds, a third one for rental property payments and a final savings account. We find it very difficult to spend money!
- We still live like university students. We have the same furniture we had in graduate school (except for the beds we bought for our sons). We hike, camp and occasionally stay at hotels during our vacations. We make sure we have money saved up before we go to Jasper or Banff for our vacations.
- We teach our children to be frugal; frugal parents breed frugal children. Undisciplined spenders teach their children how to spend; we teach our children how to save and invest. If I teach my boys nothing else about financial matters but how to live below their means, then their financial future is assured.
So that's how we did it: our family secrets. Do you want to use these secrets or do you want to keep unconsciously spending and wasting your money? It's really not that difficult to do what our family did but it does mean that you will have to be a little bit different in your buying and spending habits. It means you will have to think before you buy. It means that you will have to have a lot less money in your wallet and a lot more money in inaccessible places like your retirement funds, savings accounts, Canada Savings bonds and tied up in real estate. You will feel poor some of the time when you can't buy that new attractive shiny product advertised in the most recent flyer but the list of assets in your family's net worth statement should help to assuage that feeling of poverty.
"My Story" is a regular feature of The Dollar Stretcher. If you have a story that could help save time or money, please send it by mailto:MyStory@ stretcher.com.
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