Things have been pretty tight when it comes to my budget lately. However, just because I'm watching my costs, it doesn't mean that I don't consider the same types of things before spending whether times are good or bad. When it comes to my money, I want to make sure that I'm using it in the most efficient and effective manner possible. Therefore, there are certain things that I consider or questions I ask myself before I spend my hard-earned dollars.
How long will it take me to recoup this cost?
It's easy to run out and grab some fast food or pick up a quick gourmet coffee, but how often do we ask ourselves just how much we had to work for these seemingly trivial purchases?
Let's take a $20 hourly income for example. Well, after a 25 percent knock off for income taxes, we're down to $15. If that fast food lunch or gourmet coffee costs $7.50, that's half an hour of work that must be done to recoup that cost.
Is it worth it?
Could I DIY?
I've been amazed at the projects and type of work I've been able to successfully undertake in an effort to do things myself and save money in the process. And in this day and age, with the Internet as a teaching tool, there are variety of jobs and repairs that I can research online before tackling them myself.
From removing baseboards and re-staining them and fixing a leaky toilet, to repairing the sink's dripping p-trap, removing floor tiles or painting a home, for someone who never considered himself very handy, it really is amazing how many thousands of dollars I've saved over the years simply by doing some studying and having confidence in my DIY abilities.
What else could I do with this money?
It's easy to become selfish or short-sighted with our money. However, sometimes it's important to consider what else we could do with our funds.
The answers to this question might not always be what we might consider "fun" for us, but they can be rewarding in other ways and for other people. Going back to my fast food and gourmet coffee example, even just blowing a quick $4 a day on such treats adds up to nearly $1,500 a year. This money could instead go toward a vacation for the entire family, a college plan for the kids (since by the time our youngest is 18, this amount would add up to be about $27,000), retirement funding for ourselves, charitable causes, or other notable saving or spending endeavors.
What would or could this money be worth?
As I mentioned, just a quick bite to eat each day could add up significantly, but there is often more than just the near-term cost to consider. What would this money be worth if I invested it?
My coffee/fast food example in which I could save almost $1,500 a year through simple sacrifice illustrates the sum that such savings could equate to over the term of just a year. But what if I invested that amount annually at a 5 percent compounding interest rate over the next 30 years? Well, that money would eventually grow to become over $100,000, which is nothing to scoff at.
So just taking a minute to consider just a few quick things can make a big difference in how I spend, upon what, and how I view and appreciate my money.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
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