Five spending cuts that will boost your savings
How frugal are you? It’s said that people today treat wants as needs, splurging on luxuries that bring brief consolation and sap our savings. The question is, which expenses to avoid? You probably know to be wary of products pitched by a cold call or mailed brochure. And, presumably, you are not about to buy a yacht. Here are five more specific expenses to cut.
1. Credit crunch Financial planner Rodney Bukuya’s No.1 rule is: do not borrow for anything that will not make you money. That means no credit cards – Bukuya uses a debit card and spurns personal loans, except on property that he does not occupy. Let a tenant pay off the debt. Claim the mortgage interest as a tax deduction, he suggests.
2. Designer rort Bukuya’s second bugbear is labels: brand-emblazoned clothing. He refuses to pay for the privilege of doing a company’s marketing, he says. Paying $180 for a designer shirt because it carries a preferred label borders on insanity, he adds.
3. Holiday fling Holiday homes are another suspect purchase, says wealth coach Michael Miller. After buying one while away at an exciting new destination with nice weather, you may find that its charm fades fast. Soon, you long to travel elsewhere, but you are stuck. If the property was bought with a $400,000 loan, say, that will cost $23,000 a year at 5.75 per cent interest. Maintenance costs help make it a money pit.
4. Car crash Buying a new car every few years is also folly, says consumer finance expert Kirsty Lamont. ‘‘New cars suck your wealth quicker than an industrial vacuum cleaner, depreciating faster than almost any other asset,’’ Lamont says. When you drive it out of the showroom, up to 30 per cent of its value vanishes — another chunk vapourises in two or three years, she adds.
5. Tech trap Financial planner David Rae says beware of becoming over-connected. Assess whether you need cable TV, an internet connection, mobile plan and an iPad plan. Other iffy outgoings identified by financial advisers include cafe coffees, which add up to more than the cost of an espresso machine.