He is not altogether wrong but at its core planning for your future income is based on some guesswork and assumptions. You have to make a guess as to what your expenses will be in 25 or 30 years’ time you have to assume how much your pension fund will grow by, what age you want to retire at and so on and some of these things are hard to predict and have control over.
There is a rule of thumb in the pension industry that says you need to save enough money to be able to live off about 67% of your pre-retirement income. If you earn €80,000 for example you should plan to have c. €53,600 per year when you retire. I completely disagree with this method and it amazes me how stupid this idea, something most banks and financial advisors peddle. When planning for retirement income you should plan and be guided by what your current expenses are. And you should benchmark this amount from what your current outgoings are by the way.
A client of mine (age 37) earns €65,000 per year and if he was to plan for an income to replace 67% of that i.e. €43,500 as was suggested by his bank, he would need to have saved c. €1,309,058 in his pension fund and in order to do this he would need to put away about €33,000 each year for the next 28 years which of course would not be possible. And when you hear things like this, what do you do, you do nothing, you give up because why bother when you have no chance of succeeding – when we carried out the exercise I am just about to tell you about we identified that he needed c. €2,200 per month which meant he needed a fund in his pension at 65 of €360,900 and not €1,309,058.
So rather than just pick an arbitrary number based on your salary, a figure that you will find next to impossible to replace, look at what your current monthly outgoings are and do the following:
Complete an income and outgoings budget showing what you typically spend your money on each week, month and year. You don’t have to be terribly accurate to begin with, guesstimates are fine.
Now deduct from this budget your current expenses that you will no longer be required in retirement i.e. mortgage repayments, life assurance premiums, car repayments, savings plans, costs associated with children etc.
Now don’t forget to add expenses that currently come out of your salary that you will have to pay out of pocket once you are retired. And what extra expenses do you want to budget for during retirement - these would include things like travel, or extra money for medical expenses.
Subtract other sources of income you may be in receipt of such as rental or investment income or the state contributory pension or any other pension income you may have from what you estimate your annual expenses will be. The amount left over is the amount you will need to withdraw from your pension fund so whatever this figure you are left with is, is the amount you will need to spend in a given year, and you now need to multiply it by 25.
Here is an example:
Expected Retirement Expenses
€40,000 per annum
Other pension including state contributory pension
€15,000 per annum
Rental and investment income
€7,500 per annum
€22,500 per annum
€17,500 per annum
Pension fund requirement is €437,500 (€17,500 x 25)
The reason for multiplying by 25 is based on the amount you can withdraw from your pension fund but it doesn’t factor other things in like rental or investment income, the state contributory pension etc. and this rule of thumb assumes you will be able to generate an annual return of 4% on your pension fund.
It assumes that over a 15 to 20 year term your pension fund will produce returns of 6% (Warren Buffett predicts this is what stock market indices will return over the next few decades) Inflation will erode the value of your Euro at an average long term rate of 2% meaning your real return after it is taken into account is about 4%.
Another pension rule of thumb is called the 4% rule and it is linked to the Rule of 25 but the 4% rule is based on the amount you can withdraw without depleting your fund each year.
For example you retire with €300,000 in your portfolio, you should withdraw 4% of it i.e. €12,000 per year. Of course you can withdraw a lot more but eventually and depending on how much you need, the fund could run out. If for example you were withdrawing €30,000 per year, then in 10 years your fund would eventually run out.
So, the Rule of 25 estimates how much you will need in your retirement fund and the 4% rule estimates how much you should withdraw from your fund each year after you have retired.
Do you need to adjust for inflation? And the answer is yes of course you do.
If for example you want to withdraw €30,000 from your pension fund each year and you are 25 years away from retirement then you your inflation adjusted target is €80,100.
Here is a quick summary of how you can factor in inflation:
If you are 10 years away from retirement multiply your target income by 1.48
If you are 15 years away from retirement multiply your target income by 1.80
If you are 20 years away from retirement multiply your target income by 2.19
If you are 25 years away from retirement multiply your target income by 2.67
The Rule of 25 and 4% rule are not without their draw backs and should be used as a guide only. It is hard to predict with any certainty what tax rates will be in the future, what the state contributory pension will be, what utility costs will become decades from now so the bottom line here is to at least start and aim for something and yes there are what I refer to as what we know and what we don’t i.e. the unknowns and these are things that yes you need to be aware of and be able to react to which is why it is important to build in flexibility into your plan so that you have the safety net to fall back upon i.e. don’t rely too much on the state pension, try and plan for without it or it you are planning to include it maybe take 50% from what the current rates are – this is one of the reasons I encourage people to slightly over estimate how much they will need in retirement.
Tax relief (€1,000 x 20%)
In this scenario there is no need to contact Revenue as your medical insurance provider will implement the necessary changes to the amount of tax relief due.
However, there are certain situations where tax relief at source (TRS) does not apply, and that is when an employer pays the health insurance premiums on behalf of an employee and his or her dependents. In these circumstances a benefit in kind liability arises – PAYE, PRSI and USC are deducted from the earnings of the employee on the value of the benefit that is being provided and paid for.
Because the employee has not benefited from the TRS arising on the premium paid by their employer, they are still entitled to the tax relief but in these circumstances it is necessary for the employee to calculate the amount they are entitled to and make a claim directly themselves to their local Revenue office.
Example 1 – Single Individual – Employer pays 100% of the premium
Gross Premium paid by employer
Tax relief granted to employer - €1,000 x 20%
Net payment made by employer
Employer payment to Collector General
The employer in this instance will calculate the PAYE, PRSI and USC due from the employee on the full €2,000 paid and in turn pays the €200 they receive back in tax relief to the Collector General.
As the employee has not benefited from any tax relief and is charged BIK on the €2,000 payment, he or she is entitled to a tax credit of €200 in his/her tax credit certificate.
Example 2 – Two adults at €1,200 each and two children at €300 each – employer pays 100% of premiums.
Gross Premium paid by employer
Tax relief granted to employer - €2,600 x 20%
Net payment made by employer
Employer payment to Collector General
In this instance the employer is charged BIK on €3,000 and is entitled to a tax credit of €520 in their tax credit certificate.
Example 3 - Two adults at €1,200 each and two children at €300 each – employer pays 75% of premiums.
Gross Premium is
Portion of premium paid by employer (75%)
Tax relief granted to employer - €2,600 x 75% x 20%
Net payment made by employer
Employer payment to Collector General
Portion of premium paid by employee
Tax relief granted to employee - €2,600 x 25% x 20%
In this instance, the employee has received tax relief at source of €130 in respect of the premiums paid by them but they have not benefited from the TRS arising on the portion of the premium paid by their employer and is therefore entitled to a tax credit of €390 in their tax credit certificate.
You can make a claim by either:
1. Phoning your regional PAYE LOCALL service or
2. Complete and submit a claim for Medical Insurance and Age Related Tax Credit to your local Revenue office – a link to the claim form is at the end of this article and can also be found in the My | Resource Library inside My|Money.
And don’t forget if you haven’t made a claim in recent years’ there is a 4 year time limit so any claim has to be made within 4 years after the end of the tax year to which the claim relates to.
For further information see below...
While he has the money to buy a property outright, he wanted to know if it would be the right thing to do. Should he exhaust the majority of his savings, or should he borrow the money and get mortgage instead?
This gentleman is far from alone because buying a property for cash is not as unusual as you would think. You would think that the majority of people buying properties struggle just to save a 10% deposit – and they do – but they are primarily first-time buyers. There is still a cohort of people who are buying properties for cash and a report recently carried out by myhome.ie, in association with Davy’s, found that cash buyers accounted for 50% for all transactions in the housing market in the first six months of this year.
So, why would you buy a property for cash? There are many obvious reasons and the first would be the interest payments you would save by not having to take out a mortgage. When you look at the overall cost of buying a house with a mortgage over, say, 20 years at an average interest rate of 5%, the eventual difference between using a mortgage and paying for it in cash is huge.
Let’s take an example of buying a property costing €200,000 where a mortgage is taken out for €140,000 i.e. 70% of the purchase price. The interest paid over a 20-year period is c. €81,745. Of course, you will be allowed to offset 75% of the interest payments against your rental income and in this case, assuming the borrower was taxed at the higher rate of 40%, the net cost of borrowing that €140,000 is €57,222.
Sometimes people overestimate the value of being able to offset the amount they pay in interest to their bank and whilst it is absolutely welcome and a big benefit for people who have to borrow money to buy an investment property, unfortunately it is not nearly as big a benefit as some people think. In no way doesit compensate those people who have the cash to buy a property – you will without question repay significantly more over time if you borrow money as opposed to using cash. You would think this is very obvious – and it is – but there is a lot of misinformation out and some people people mistakenly think they will be better off if they borrow money than if they use their own – they won’t.
Another big advantage to buying a property for cash is how attractive a cash buyer is, particularly to vendors who want a quick sale. Being able to close a purchase within a very short time period, avoiding all the paperwork that comes with someone who is getting a mortgage and going through that process, gives cash buyers a significant edge. And buying in cash also means you are more likely to get a better deal as well – if I am selling a property and a cash buyer is offering me €200,000 for but I have offer of €210,000 from a first- or second-time buyer who has yet to secure a mortgage, or who has a property to sell themselves, I might be more inclined to accept the lower bid, safe in the knowledge I will be getting money sooner rather than later.
There’s a big downside to buying a property for cash – and it was a concern to the reader who contacted me. He worried that he was exhausting the majority of his savings. Buying a property for cash, for many people, means that the majority of their money is tied up in one asset, leaving little if any funds to invest in other assets.
Having your eggs all in one basket is not a good strategy in my opinion and whilst some people are fearful of investing in the stock market, and feel safer investing in bricks and mortar, the actual long-term returns on housing fall well below returns on stocks.
According to a study carried out on the Irish market by a Nobel prize winner in economic science, Robert Shiller, from 1890 to 2014 house prices rose by 0.3% per annum after accounting for inflation. So if you were to take his data into account, it would suggest that property doesn’t make a very good investment at all, whether you are paying for it in cash or not.
If you are in that position that you can buy a property for cash, either for investment purposes or as your primary residence, paying for it in cash will work for some people and not for others. I would advise readers to avoid borrowing money at all if they can help it, provided they don’t exhaust all of their cash.
I read somewhere recently where someone said buying a property for cash was similar to investing in an investment bond that pays the same interest rate you would pay on a mortgage. I thought this was a great way of describing it. Opting not to pay a 20-year mortgage with a 5% rate is essentially realising a 5% return on the purchase price – something to think about.
I was doing some research on this subject recently and discovered that the approximate cost of putting a child through college for four years who is living away from home is €41,880 and €27,156 if they are living at home. This annual cost covers accommodation, travel, books, clothes, social life etc. It does not include the annual registration fee either which is currently €2,500 rising to €3,000 in 2015. Of course this cost could be reduced by grants, scholarship’s, tax relief on registration fees, the child earning a part time job and so on but the reality is that the amount required is substantial.
So, how do people do it? Well according to a study carried out last year by the Irish League of Credit Unions, this is how some finance the cost:
· 42% save the money (they save on average only for a period of 8 years)
· 29% borrow money from their Credit Union or Bank
· 6% use their credit card
· 2% borrow the money from money lenders
And I am sure there are a big percentage of people who use a combination of all or some of the above along with using funds from their current monthly income.
The majority of people I meet try not to use their monthly children’s allowance if they can and deposit this into a savings account that will eventually be used for that child’s future education. And if you can do this then fantastic, you are well on the way to accumulating the funds required – BUT do you really know how much you should be setting aside each month?
Before I answer this question for you, let me first tell you about a conversation I was having with a client of mine recently where I began telling him how much it was going to cost him and his wife to put his 8 and 6 year old boys through college.
Financially he could afford to put the amount needed aside each month but he said that he saw great value in having his children share the cost of their education. He is a very successful businessman but he came from very humble beginnings where his father didn’t earn very much but it didn’t stop him from going to university. He worked two jobs whilst studying for his degree – he had no other choice and he said it did him no harm at all.
He went on and told me that of course he didn’t want his kids to be saddled with debt before they left college and nor did he want them worrying about money every week but he did say that letting his kids in on the financial realities of college, when they are old enough, would be one of the more important lessons they will learn from their college experience. There is no harm, he said, in them getting a weekend and or summer job to help with the costs of their education and I am sure this is the reality for most.
Back to answering the question at hand – how much is it going to take each month to save and put a child through 4 years of college? And the answer is going to be based on a number of factors:
What age they are when you start saving?
Whether they are going to live at home or away from home whilst at college?
What % of the total cost of their fees you are going to pay – and this is important because it doesn’t have to be all or nothing. Maybe you can’t afford to put away an amount now that will pay 100% of the costs but you might be able to put away an amount that will cover 75%
So, I am going to put together a chart for you, based on just using your regular savings only (no borrowing!!) that will help you (a) see if what you are saving in enough to meet your child’s future college costs and (b) what is required from you if you are just starting off. And there are a whole host of permutations that I could apply to this and many different factors we just don’t have control over (future costs of fee’s, inflation, interest rates etc.) but this is a good starting point and something that you can react to and plan for right now and amend if required over the coming years to make sure you stay on track.
So, after doing some research I found some investments that have yielded returns of between 7 % and 9% over the last year and about 240% over the last 10 years.
I am sure you are wondering what on earth could make such great returns so let me give you a couple of clues before I let you in on the secret:
The Flowing Hair Dollar is the most expensive coin ever sold. It was sold back in May 2005 for $7.85 million. This dollar was first minted back in 1795 and features the image of a woman, with flowing tresses, surrounded by 15 stars with the word “liberty” above her head.
In June 1938, the very first edition of a comic book featuring Superman was published by Action Comics. Fast forward to December 2011 and the lucky owner of one of those first editions sold it for $2.1 million and was reportedly bought by the actor Nicholas Cage.
The first edition of JK Rowlings Harry Potter & the Philosophers Stone had a print run of just 500 and 300 of them were given to libraries leaving only handful of the quality that investors wanted to purchase. A copy of this book was sold last year for…..£18,485
…there are 60 million people worldwide who spend in excess of €73 billion buying stamps alone.
And a Treskelling Yellow is in fact the most valued postage stamp in the world. It was originally sold in 1996 for $3 million but was later sold in 2010 for an un-disclosed amount, apparently far in excess of the $3 million paid for it in ’96.
Of course all of these items are alternative investments that some people, those who it would appear are very wealthy invest in, and of course in these examples we are probably talking about the superrich being the owners but surprisingly there are millions of people who invest in these types of areas with very modest amounts of money.
And there are many other areas people invest in as well like wine, cars, jewellery, art, and so on. And there really is a very big market for them – and not everyone as I said invest the huge amounts I just referred to. For example there are 60 million people worldwide who spend in excess of €73 BILLION buying stamps alone.
Now for some people it is a hobby but for others they buy them purely for investment – they want to get a return from what they bought them at to what they hopefully appreciate to. The reasons for this apparently are driven by two big factors which are (a) very poor interest rates and (b) the financial upheaval that began in 2008 where individuals and institutional investors had to re-think their long held asset allocation strategies.
Of course investing in alternative products rather than putting your money on deposit is a very, specialised area and knowledge and absolute care is required. You obviously need to know you are buying from a name you can trust along with the “five golden criteria” when buying any item which is:
However I am sure if I did I would now be looking at a healthy profit on whatever I invested in given that some wines have appreciated by over 11% each year for the past 10 years. But given the state of our finances back then I think the most we could have scrapped together was the price of a couple of bottles of Blue Nun!
Investing in alternative investments isn’t for the faint hearted though because purchasing things like coins, art, books etc. are very volatile and antique furniture for example is something that has fallen out of flavour in recent times where not only your once held profits take a nose dive so does the amount you used to buy them in the first place (Antique furniture has seen a -19% return from 2003 to June 2013.
Many experts in any field I have referred to recommend that if you are buying either a book, stamp, wine or whatever it is that you do so with the intention of holding onto it for two seven year cycles to see any decent return on your investment. The first seven years you wait until you get your money back and the following seven is where it appreciates beyond what you paid for it.
Investing in alternative investments isn’t for the faint hearted…
I believe using your money to invest in this area is fraught with danger and I don’t like danger when it comes to investing. I don’t want to lose an absolute cent if I or any of my clients invest their money so I believe this is something that people can dabble in once they know the risks involved and are aware they could lose all of their money.
The up-side of course is that you could strike it lucky and buy something that appreciates in value beyond your wildest dreams but the chances of this happening are slim. I think the majority of people invest and buy things they like and enjoy for themselves and get pleasure out of and it is more a hobby for them rather than trying to make any money.
Let me leave you with a very quick story about a man living in the USA. He had been living in this house since the 1950’s but he lost his job and fell behind on his mortgage repayments and the bank was about to repossess his home – he owed $200,000. He was cleaning out his attic putting things in boxes getting ready to move out when he found a very old superman comic – thinking nothing of it he brought it along with other comics to a store to sell hoping to get $100. To his amazement and disbelief that particular comic was worth $436,000 so Superman really did save the day after all so get into your attics and start looking around – you might be surprised at what you will find.
Your resources is that surplus you have at the end of each month that can be used to overpay your mortgage, pay down debt, save for your summer holiday or whatever it is your financial goal is. If for example you want to save €200 each month but your surplus is €50 at the end of each month, then you know what your shortfall is and unless you can make it up, then your goal will not be reached in the time frame you want it to and in many cases it is never reached because people think they will never be able to make up the difference.
And for many people it is fine having all the goals in the world but they have no idea where or how they will create that surplus each month. Just when you have all the motivation in the world, you then you look at your income and outgoings and bang you feel it’s a hopeless cause.
Let me very honest with you, unless you create a surplus each month, financially you are going nowhere, so there is no easy solution. If you can’t earn any more money, then you are going to have to spend less. And I don’t mean to sound patronising when I say that because I know many of you are already committed to that fact.
If you can’t earn any more money, then you are going to have to spend less
But the challenge to you who are doing this and to those who haven’t yet but need to, is to re-think and re-work your monthly budget so there is money leftover at the end of the month, the amount you need that you can put towards your 2014 financial goals.
Before you can start to change and improve your monthly finances, you need to know exactly what you are up against and what it is you need to change and improve on. So, you need to analyze what your income and outgoings are each month.
I am going to help you with this by making a household cash flow worksheet available to you (just send me your email address and I will send it to you) and what I want you to do is complete it slowly and carefully.
After you have done this, I then want you to put the following letters apposite each spending category – PERK – and they stand for:
P = Postpone
R = Reduce
K = Keep
This is an idea developed by a man named Robert Pagliarini who is convinced that people can dramatically reduce their monthly outgoings by spending (excuse the pun) sometime analyzing and categorizing where they are spending their money on. It is a very simple process and it is one I have used myself and I know it really can help you save money each month.
POSTPONING means putting off incurring an expense like changing the car, buying a new computer, home improvements etc. where you create more money straight away that can be used towards your savings or debt repayments. A client of mine was thinking of changing his car this month just because his existing loan was coming to an end but why take on another debt when the car was running perfectly fine, so the €395 he is repaying BOI is now going into his savings account instead – he simply postponed taking on a new loan.
ELIMINATE means looking at those monthly expenses you can get rid of and are things you won’t miss if you do. What are those small monthly costs you incur each month (weekly fee’s for weighing yourself – weigh yourself at home, or the gym membership you don’t end up using) that when added together actually add up to be quite a bit? When I read about Pagliarini and the PERK system, he made a very good point by saying you need to spend time on this area and things that made sense at one stage in your life, don’t anymore and haven’t for a while so it’s time to let them go.
Next up you need to assign R for REDUCE to your budget and this is the one big area where you can make real savings. Can you reduce the amount spent on takeaways, your weekly grocery shopping - what if you brought your lunch to work one day per week? Can you reduce the amount you spend on home insurance or life assurance premiums? According to a report published in September of last year, the National Consumer Association found that almost half of consumers in Ireland never bother to compare prices to see if they can get better deals with utility providers. We have no problem switching supermarkets but we are very slow in other areas and those that don’t, according to the NCA, are leaving about €1,000 behind them each year.
And finally, I want you to look at those spending areas that are very important where you put a K opposite them which stands for KEEP. And they are the must pay expenses like car, home and health insurance and other expenses such as mortgage or rent repayments etc.
Doing this PERK exercise is all about becoming aware of where your money is going and what you are spending it on each month, which, in my opinion is what people lack the most. And yes it is a pain in the ass sitting down and going through what you spend your money on each month but just keep those goals in mind when you do, because it will all be worth it in the end, I promise you.
For many of us a mortgage remains a huge psychological barrier standing firmly in the way of financial freedom.
Being in debt forever has become a real possibility for homeowners particularly with falling house prices, big mortgages, and interest only loans to mention but a few. It has resulted in huge loans that we grudgingly spend most of our adult lives repaying.
The term mortgage has it’s origins in France and literally translates into English as “death contract” and for many people that is exactly what it is – a legally binding contract that will not end until you are close to death.
Of course the Irish see our homes as our castles and therefore the offer of a mortgage on a house is a cause for celebration. We view our home as an asset where of course it is not, it is the biggest, most expensive loan you will ever take on and the quicker it is repaid in full the better off financially you will be and the better your quality of life will become.
Unless we win the lottery repaying a mortgage of say €300,000 in less than 20 years will be beyond our means as well as the willpower of most borrowers. You could work 8 days a week and live off baked beans until your loan is cleared but for the majority of us this is unrealistic.
But what if you were mortgage free? What if you didn’t have that monthly burden which is actually lining your banks pockets?
A mortgage is set up to drain your bank account and people don’t realise that they are in fact working for their bank. And they know that some people could repay their mortgage faster but they are not going to tell you how or help you in anyway because it cuts their ability to take money away from you for years on end.
So, a bank wants you to keep paying them for decades but what if you repaid your mortgage in a fraction of the time?
A study was completed a couple of years ago that followed 100 people from the start of their working career for 40 years, until they reached retirement age, and this is what they found:
“That must be costing you a fortune” I said and he nodded his head in agreement. All in all they were going to spend about €7,500 from having the house redecorated, a couple of new plasma TV’s (to impress the guests of course), food, drink and entertainment.
As nice as these people are, and they are, they have fallen prey I believe to two things, one which is conscious i.e. “keeping up with and being better than the Joneses” and secondly something that is unconscious, what consumer behaviour experts refer to as a "spending trigger" which is an emotional state that makes people more vulnerable to parting with their money.
I have identified what I believe are the 5 things that I come across all the time, that are these triggers to people spending more than they have and the first is what my friend is doing next weekend – entertaining.
…when we get or crave for something we want we get a hit or a buzz which apparently is as powerful as cocaine.
There is nothing like someone coming over to your house for whatever reason that makes some people spend more than they need to. I remember speaking with a client of mine last year who admitted to spending over €500 on a new barbecue (the one he had was fine) because his in-laws were coming over and he wanted to impress them with this brand new, huge barbecue. I almost forgot to mention that he also bought a new gazebo and a cast iron chimnea (an outdoor fire to you and me)
So, whether it is having people over to celebrate a communion or just for a couple of hamburgers, the need to impress people can take many forms but spending more than you need to or worse still getting into debt is code red – don’t go there. People won’t think any less of you if your barbecue is a few years old or god forbid you don’t have four 50 inch plasma TV’s in each room of your house.
Science by the way has an explanation or maybe it is an excuse why some people “want” things all the time because we are driven by a chemical in our brain called dopamine which means that when we get or crave for something we want, we get a hit or a buzz which apparently is as powerful as cocaine.
Anyway, back to the second reason we spend more than we need to is, “because I deserve to.” The rationale for some behind this is they “I work all the hours God sends” so as a reward I deserve something for all my hard work – sound familiar? In moderation there is nothing wrong with the odd splurge, in fact I encourage many of clients to do this from time to time, especially if they achieve a certain goal like reaching a savings target, paying off credit card debt etc. The problem comes when you constantly reward yourself and your budget goes out the window at the end of every month. So, let’s assume you do work an 80 hour week – does buying a new item of clothing really make you feel better? What would make you feel happier? Getting home earlier each night? Getting an extra hour sleep? And speaking of sleep, it is the best way to prevent you from overspending, there’s psychological research that found that after 48 hours on putting off buying something, the dopamine chemical I just referred to wears off.
What about that other chestnut we spend more than we sometimes should on – holidays or weekends away.
If only we had the weather they have in Spain sure’ there’s no reason to go abroad – we have all said this at one stage and we are just trying to make ourselves feel better and justify the amount we are going to spend or borrow for our two week vacation. For me a holiday abroad is something I look forward to every year and myself and Roseann set ourselves a budget for flights, accommodation and so on not long after we return home so we set about planning for next years’ getaway shortly after we return – we do this because it is important for us to have experiences with our kids’ while they still want to go away with us. However, if we couldn’t afford to go and the only way we could was if we had to borrow money then absolutely we wouldn’t no matter how much we think we deserved a break. So, the key here is set yourself a goal to go abroad each year or better still stay In Ireland and have you break here if that is what you want, know how much you want to spend and stick to it – you don’t want to come home with lovely pictures of the sun setting over a magnificent mountain range….alongside that other picture of a mountain of debt!
The fourth reason we spend more than we should is down to whether we are looking for love or not.
There is no doubt that people who are dating spend more. Whether you are male or female there is that temptation to spend on things like getting your hair done, new clothes, a new bottle of old spice etc. While it may make us feel better and more confident the person you are going on a date with may not know that the dress or shirt you are wearing isn’t brand new. Have a look at your closet, you don’t need a new outfit for every date and according to many relationship experts, first impressions come down to not what you are wearing, but what you convey.
The problem comes when you constantly reward yourself and your budget goes out the window at the end of every month.
And finally we are vulnerable to overspending on things that promise us to look younger, thinner and prettier. New cosmetic products, slimming pills or joining the gym, for example, to get in shape rather than going for a free run outside in the fresh air are all areas we definitely overspend in and of course with a new gym we need new clothes, another expense!
I am not suggesting we should never not spend of course we should, we are only human, however we just need to be that little bit more aware of what those triggers that lead to overspending are -because if you do you won’t have as many financial regrets as others most certainly do.