Be sure to check out the rest of our Budgeting mini-series:
Part Six: Looking Toward the Future
What really prevents a person from properly budgeting their finances is a lack of looking at the long-term. Think of it like reaching and maintaining a healthy weight: we have to look beyond the instant gratification of a tasty cheeseburger-and-milkshake combo, and realize that salad (sans dressing) and a tall glass of ice cold water is going to pay off in the long term. If you’re generous with throwing your money around, you’re not going to have much of it for very long. It’s wise to be financially savvy!
Deciding that you’ll only spend a certain amount each month, however, isn’t quite enough. By spending within your budget, you’ll still see your money sitting there in your bank account, and you’ll be tempted to spend it. Yes, you will! No matter how good you are at watching your finances, you’ll think of some reason or another to spend an extra five/fifty/five hundred dollars. Instead, put some money into investments on a regular basis.
Investments are brilliant. Take, for example, the letter that I received two days ago with my Financial Portfolio Statement. It showed me that in my non-registered investments, I have over $2,500. To me, that’s a fair amount of money! And how it got there is really sneaky, too: every month, Investors Groups takes $250 straight out of my bank account and puts into my savings account. A couple years ago they started with $150, but I figured I might as well increase it another $100 because I didn’t “notice” it missing from my account. As I increased the amount and watched my bank account, I simply adjusted my spending a little bit more (no doubt, if I didn’t take the extra money out, I’d just spend it unnecessarily instead). You can always cut back somewhere, without going into debt or needing financial support from someone else. The little tricks that we’ve discussed the last couple weeks will help you out with that.
Non-registered investments, such as the type I’ve mentioned above, mean that your money is simply going into a separate account and just sitting there. It’s not being spent by you because you don’t have access to it, and it’s also not making any money because it’s not a registered investment. But it’s good to have registered investments, too: this means that you set aside a chunk of money (which you can add to whenever you like, as far as I know), and then it makes money with whatever company or product you’re investing in.
Some people think that you can “lose” money by going into registered investments, but I don’t see it that way: you will never lose any of the money that you put into the investment. The only money that you “lose” is money you would already have “made” with whatever it is you’re investing in. Therefore, that money was never really yours: it’s all just on paper. I think that this is a much less stressful way to view it. Investments aren’t really such a risky business. Your money isn’t going anywhere. You’re either going to make a profit, or else you’ll just have the same amount of money that you started with. Win win, in my opinion!
So what are you going to do with all your savings? Well, that’s up to you. Maybe you’ll save to go travelling, or to buy your dream home, or to start your own business, or to have a nice retirement fund. You might not even know what you want to do with the savings that you’ll have in the future, but that doesn’t matter right now. You’ll likely change your mind as the months and years go on, anyways! The important thing is to simply save up your money, just in case you spontaneously decide to buy a place, or the economy suddenly plunges, or you go stir-crazy and want to get up and leave your country now. You’ll be all set for any possibility if you start your savings today.
We’ve talked about credit cards already in this Guide to Budgeting mini-series, but it’s worth touching on again with regards to the long-term. Sometimes people cannot trust themselves with a credit card, in which case it’s better for them to use cold hard cash to see the money actually being handed over with each transaction. But if you can be trusted with a credit card, use it for everything (and then pay it off immediately). This way, you will build up your credit rating. When you want to buy a beautiful loft condo in the heart of downtown 😉 the bank will be able to see that you are good at managing your money and that you always pay off your credit card, and they will be only too happy to set everything up for you so that you can afford your new home.
While we’re on the subject of the long term, I also think it’s important to think about the future of others, especially in today’s greedy WANTSTUFFNOW society. You’re able to set aside $100+ for your savings account and investments, right? And you’re able to budget your grocery bills and organize your finances by now, too. This means that it’s time to think about how you can give back to those in need. Pick a charity, any charity (preferably one whose philosophies you agree with, and which also gives a large portion of your donations to those in need rather than keeping it for administrative purposes). With World Vision, you can “adopt” a malnourished child living in an under-developed country for $35 a month, for example. And now that you are making your coffee at home rather than buying it at Starbucks four days out of the week, you can probably easily afford to support two children! (Plus you don’t have to deal with the nuisances of having a child living in your home. I kid, I kid). $35 is about the same amount of money it costs for a monthly gym membership at the YMCA. I figure that if we can afford the luxury of a gym membership- the luxury of needing to exercise because we don’t get enough of it in our daily lives- then we can probably afford food and education supplies to give to a little kid in another part of the world.
The point here is that we often think that we don’t have much money, but there are so many ways that we can live frugally and save for the future and help others less fortunate than ourselves and still go out and have fun on the weekends. You can have your cake and eat it too, just make sure that you’re baking with pureed fruit instead of added sugars/fats, and that you’re using spelt or whole wheat pastry flour instead of all-purpose flour. Think outside the box and you’ll be a budgeting pro.
What do you do to prepare for the future? Leave your questions and comments below, and be sure to offer your tips and advice or added suggestions for anything I may have left out! As always, I love to hear your input on any topic.