Today, I'd like to speak to a few points about finances. In general, borrowing money so that you can have something now, will, of course, cost you extra. That's the whole concept of interest which is paying to have access to money. Nobody likes to pay more for things, but when it comes to getting something earlier, people seem willing to cough up a lot more money without actually realizing it. Stop doing this! Get a dose of patience, save your money and adopt a pay as you go mentality. 10% or more of your paycheque should automatically go into savings, and you should consider it to be untouchable money in terms of your monthly budget.
In general, avoid borrowing money to buy depreciating assets.
The first big thing that you likely borrow money to buy is a new car. This is a rapidly depreciating asset. Instead, buy a used car. Get one that is just coming off a three to four year lease. Make sure that it is a make and model of car that has an excellent quality history. This car will still be a depreciating asset but the depreciation will not be as rapid as in those first few years.
The next big thing you will likely buy is your home. This is an asset that will likely not depreciate, but should track to inflation over the long term. Shop for your mortgage and negotiate! By getting the lowest interest rate that you possibly can, you will likely save tens of thousands of bucks if not more, over the life of the mortgage. This can equate to a 1000 dollars per hour of effort you put into this. So don't be an idiot, put in the effort and pay yourself this massive amount of money! Duh!!! If you can't manage this effort or detest negotiating, then at least consider going to a mortgage broker. Also, go with a variable interest rate if you feel secure enough doing so. Fixed interest rates are simply an insurance product. Insurance isn't free, this will cost you in terms of higher rates. But know the risks involved in going with variable rates. With the baby boomers no longer borrowing money but instead are investing, there is less demand for borrowed money these days and thus rates should remain relatively low for the forseeable future. Thus, in my opinion, the risk of going with variable rates is fairly low. Also, do not mortgage yourself to the hilt. Get something you can easily afford and strive to pay it off early.
My last point for today is bank accounts and credit cards. Are you paying money to a bank in terms of service charges or a service plan just to have an account? Please stop doing this and open up an account with the likes of President's Choice Financial here in Canada. This can save you well over a $120 per year in service charges. Also, if you are not paying off your credit cards in full every month, then cut them up. You are being severely gouged. Look at consolidating your credit card debt under a personal line of credit for a fraction of the interest you are being charged now.
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