Better Watch Out for the Monthlies!

Here's how one simple approach spreads its very deep roots:

If your expenses are low, it is easier to accumulate savings.  And when you have to draw on those savings, you need less to fund your lifestyle which means that:

• Your savings will last longer
• You can retire earlier
• You have peace of mind that your money will last longer
• You can get by on lower investment returns, which means you don't have to take unnecessary risks to achieve your income goal, and when good returns come your way, they're a bonus.

Keeping your expenses under control takes mental effort, and yeah, it means delaying gratification.  I know that can be difficult, but just think about the peace of mind and the control over your destiny that you receive in return!

Keep an especially sharp eye out for the financial bogeyman that is the recurring expense.  Recurring expenses are expressed in monthly, bi-weekly or weekly terms (sometimes even daily) to make them look as small as possible, so they are more palatable to our psyches.

When the generation now retiring bought their first cars the price shown was the cost of the whole car.  Today, cars are mostly priced in monthly or bi-weekly payments because it's so much easier to rationalize them into the family budget.  "Hon, that top-of-the-line convertible is only $400 a month."

Problem is, the shiny new thing provides only a quick acquisition high which soon dissolves, leaving a hangover of payments for a long long time.

And that's the problem with recurring expenses:  they're the costs that keep on costing. 

The upgraded cable lineup, the phone with all the options, the alarm monitoring with all the bells and whistles, the weekly maid service, 5 magazine subscriptions, the new car lease, the club fees, the credit card bill that never goes away ... 

Each recurring expense may seem reasonable at the time, yet one added to the other, over and over again, results in the proverbial death by a 1,000 small cuts. 

You don't realize it at the time, when your eyes are caught in the glare of the shiny new thing, but all those monthlies add up to less financial freedom. 

And if you get to the point where you are borrowing to maintain your lifestlyle, then you are falling backwards into dis-savings: spending tomorrow's dollars before you have even earned them.

It's much much harder to get out of a dis-savings rout than to simply be vigilant about the monthlies in the first place.

So check yourself.  Next time you're confronted with a new monthly expense ask yourself, honestly: how much difference will this thing make in my life versus how much it's going to cost me each and every single month for years and years to come?  Just how many shiny new things have I been piling on?  Won't I get more from setting those dollars aside to accumulate and give me peace of mind, security and freedom, which I will never get from the shiny new thing.

Be well, and make good financial decisions,

Cheers,

Izhak Goldhaber

Z. Izhak Goldhaber, JD, MBA, CFP is the Financial Fanatic. 

http://www.financialfanatic.com

igoldhaber@financialfanatic.com