To have good financial health, you must balance what you make with what you spend.
A while back we heard a nutritionist talk about the balance between exercise and what you eat. She felt that the emphasis for general health, and a stable weight, that the focus should be 20 per cent on exercising and 80 per cent on what you eat. If you were to go for a long run and then feast on fast food, then the result would not be as you would hope. On the flip side, you could go for a moderate walk and eat a healthy, moderate sized meal, you would have a better overall result.
Personally, I’ve told my kids that spending time with people and out in nature is far better than spending time in a shopping mall or shopping online – the best part is you will be physically and financially healthier.Over the years we have had numerous discussions with our clients who are having to help their adult children get out of debt. In these cases, credit card debt has accumulated near the maximum levels of the card and the interest costs have become too daunting and unmanageable.
If you feel that you would like a new vehicle and put $50,000 for an upgrade, instead of paying down the mortgage, this will end up costing you substantially more than $50,000 when you add up the interest and depreciation costs. If the choice was to pay down the mortgage, instead o buying a new car, the interest costs would decline approximately $2,500 annually .
Below are the main categories that gives budgeting a little more clarity. We ask clients to estimate what the annual costs are for each item, if applicable.Most younger clients are not exposed to our services unless they are introduced to us by their parents through householding. We have written many articles of how families that work together can take advantage of householding. Parents that sit down and explain to their children what items cost could provide greater clarity on spending habits.
The bad snowball effect relates to when people get themselves into a bad debt situation and interest costs start accumulating. Examples of high interest debt include: delinquent bills, credit cards, non-favourable business loans, car loans, and other personal loans. Spending beyond your means is a sure way of destroying wealth accumulation. If interest costs and debt are spiralling out of control then it leaves little discretionary cash flow after each pay cheque.
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