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Tag Archives: expenses

The Payment Trap

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In my country there is a very “clever” system to teach you that you can have what you want now and pay for it later –  Splitting your purchase into payments.

This is not only harmful in planning and keeping to your budget on a monthly basis but it also nourishes the need for immediate gratification.

Instead of learning to save for what it is you wish to buy, it teaches you to buy now and think later about how you’re going to pay for it.

For example instead of saving an x amount each month for something you want to buy (TV, computer, speakers, vacation, shoes, etc…) and then having the option of paying for it in cash which more often than not usually gives you bargaining power or some sort of discount, you go out and purchase your item and pay for it in payments. While this might not seem like the most tragic thing you can do it can be very hard to keep track of what you actually spend a month on certain categories. Most often I find people forget how many payments they actually have and just keep adding to them.

For me this issue really comes home when after the credit bill is paid, I start the month with hundreds if not thousands of $ already “spent” on the card (in payments) and if I add to that all my regular purchases and expenses it adds up to quite more than I budgeted for.

There are some cases where you have no choice but to pay in payments, mostly in cases of emergency. Which is why it’s always a great idea to have an emergency fund.

Unfortunately for me I am still in the first steps of covering and eliminating debt so more on the savings and emergency funds tips to come in the future (hopefully near).

Are you guilty of splitting payments? How do you battle the urge to spend money in hopes of ‘making up for it’ in the future?

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Budgeting: Fan vs. Air Con. vs. Both

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Every Summer I wished we had ceiling fans instead of running the air con endlessly.

This year I decided to pay the initial large sum of purchasing these fans and installing them, in hope that by next summer they would have paid off with lower electricity bills.

Unfortunately so far, not only is the air con still running, we now have both running at the same time.

I blame this on terrible insulation and building contruction. Our apartment traps heat and doesn’t let it go, so even though it’s cool in the evening, the day’s heat and humidity lingers in the air and other than sitting still and not moving at all (which is the only way to feel the affect of the fan when it’s so stuffy otherwise) we need to run the air con as well (as housework, eventually, does need to be done).

We do however “save” while we sleep by running just the fans and also not waking up with scratchy throats due to sleeping with the air con all night. Hopefully as the air gets a bit cooler at night the fans will pay off as well.

I would love to hear from you – what you do to keep cool during the Summer?

 

Family Budgeting: Sink your Teeth into This

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Back (ok not so far back) in the day when I was super strict about the budget I would delay the need to pay for things that required more immediate attention. Mainly the care of my teeth.

BIG mistake. Sometimes when you’re trying to reach a financial goal and want to do everything you can to minimize expenses, you may end up paying more (much more) for it later.

Behavioural psychology studies found that people usually forgo payment of large sums despite it paying off in the long run, and would rather pay a larger sum later on if it meant that in the immidiate future they did not have to make any payment (more on that – Budgeting: Fan vs. Air Con. vs. Both).

Same goes for any car maintenance work that needs to be done (that we put off for the sake of the budget).

So when prioritizing your budget please be sure to keep this in mind. While life is full of surprises, this doesnt need to be one of them.

Family Budgeting: Trimming off the Fat

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If you have successfully gathered information and put it into a document where you can actually see how much you are spending on things and how much you are earning – Now it’s time to make some cuts.

Take a look at each category and think how you might be able to reduce payments.

Education for kids was our biggest expense, with two kids in private kindergarten. Since there was nothing to do about that for this year we left it as is, knowing that this would be a reality for the next few months until our kids got older. There were of course cheaper options for the following year which we considered but ultimately felt that where our children learn is important to us and therefore decided not to reduce costs in this category.

The choice of where to cut is individual and should reflect your priorities as well as your financial goals.

Food was another major expense for us, with two kids under the age of 3, diapers and formula added up. As we gradually started toilet training (which cut diaper costs) and were looking forward to the one year mark, after which we could switch to cow’s milk, there were other actions we started to take. This was and still is a very big challenge since food is something people don’t WANT or LIKE to feel stingy about.

Menu planning goes a long way in this department, so make lists and don’t shop when you’re hungry or WITH KIDS (on more shopping tips see post ‘Don’t Buy Me’). I even complied a priced shopping list based on the supermarket I go to, so that I know exactly how much I can EXPECT to spend and not have to dread seeing the amount at the end of my shop.  Decide which of you will go shopping; see more on this at Family Budgeting: Spousal Food Fights (future installment).

Mortgages – Since I am not an expert I highly suggest you look into the option or re-financing. If you are too intimidated or do not want to have the headache of shopping around, you can always use a mortgage broker.

For me, one of the bigger payments was my cell phone bill. Perhaps you can check other cell-phone plans that may be cheaper? Are you paying for a set amount of minutes but not actually using all of them? When my husband wanted an iPhone we changed cell companies for his special deal. I also got a “special” deal of 125 minutes for a set price. Problem was I wasn’t reaching those 125 minutes and since this was the “cheapest” plan I couldn’t do anything. Luckily a new law was passed that cancellation fees (usually given for switching between companies mid package commitment period) were being significantly reduced and I was able to switch to another company and greatly reduce my monthly payment for cell bills.

Other areas to check and price compare are insurance payments. You may be paying at various places for the same coverage, you will have to call and find out exactly what you are paying for to see if you can perhaps cancel one or more payments. Since companies do NOT like to lose clients that easily, you can shop around and get price quotes to bargain down your current payments.

Once you have really looked and considered each category for “slashing” it’s time to build your ACTIVE BUDGET, more on that in the next installment.