Spending Matters

Money you don’t spend is better than income

You don’t need the capital to earn interest and it’s because the value is not taxable.

Suppose you could reduce your cost of living by $100 per month. $1,200 per year. That is the same thing as having $60,000 in the bank earning 3% with an after tax return of 2%.

Why care? 

A cost of living reduction is easier than other ways to get capital together. Suppose you had the $60,000. I’ll bet you would know how you got it. If you carelessly overspend by just $3.29 per day, you will make the income from your money worthless.

Does anyone still smoke? 

What is the capital value of a pack a day habit? Here in Ontario it’s about $200,000.  If no one could smoke until they saved the $200,000, there would be few smokers.

Hard to assess value

If the amounts are small, people don’t pay much attention. There is no context. To get ahead, define the capital equivalent and get busy shopping.

Shopping for value. 

Retired people usually have time to invest in shopping. I was recently talking to a person who thinks they could save 15% of the their cost of living. About $16,000. He has quite a collection of tricks.

Pretty ambitious, but in their tax bracket, it is like having $900,000 in term deposits.

When you are retired, it is hard to save $900,000.

Work it out

There is something satisfying about living well for less. No investment risk either.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

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