Know where you’re spending: A back to basics approach to increasing wealth

“The art is not in making money, but in keeping it.” ~ Proverb

As a financial educator, I’m commonly asked about the best ways of increasing wealth. My first response, as the old adage goes, is to pay yourself first.

This is simple enough in theory but in practice; well, that’s another story. Most people spend first and save what they have left over, but the best plan is to do the opposite. Set money aside first and then spend the remaining on the essentials etc. This is the foundation to financial success and it’s what separates the haves from the have mores.

The starting point to achieving any financial goal is to understand your current financial situation and, if necessary, to make adjustments so that your goals are achievable. The first thing you need to examine is your income verses expenses.

Income should be pretty straightforward but tracking and analysing your expenses requires a little more work. There are many useful tools on the internet which can help you with this, such as Mint.com or on-line banking portals.

Once you’ve developed an overview of your expenses and have a better understanding of where your money is going, you can start making some adjustments. Remember: small changes add up to big differences.

Look at patterns in your spendingDo you grab a coffee and muffin on your way to work each day? If so, you probably spend about $5 each time which could add up to over $1,250 annually. A $10 – $15 lunch bought daily will set you back $2,500 – $3,750 and dining out each weekend, depending on your level of indulgence, could cost $5,000 – $10,000 per year. Reducing these types of expenses can go a long way in increasing your available funds. If saved, the annual cost for these items alone could cover a year of university tuition for one child.

Maybe you’re not that concerned with the $5/day coffee costing you $1,250/year, but think about the big ticket items in your life. Purchases like a vehicle, vacations, home electronics, furniture etc. For example, the interest savings in purchasing a $70,000 vehicle as opposed to a $100,000 vehicle can result in huge annual differences. If properly invested, that additional $30,000 could grow substantially.

Saving is one of the hardest things to do because it requires discipline, effort and awareness but it should always be your number one priority. Taking a disciplined approach to those small and big ticket items can result in significant savings, which will allow you to happily add to your net worth. Ready to discover new ways of increasing your wealth? I can help.

Darin Yuzyk has over 20 years of experience in financial services and education. He customizes and delivers employee-focused education programs for a variety of corporate clients. Through compelling and dynamic group seminars and one-on-one presentations, Darin helps employees understand and personalize their pensions and financial plans.

 

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These articles are for general informational purposes only. Please obtain professional advice before taking any action based on this information. No endorsement or approval of any third parties or their advice, information, products or services should be implied by any references to third parties contained in any article. Trademarks cited in these articles are the respective properties of their owners.

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