Canadians 'drowning in debt': 47% will borrow to cover costs, survey says

[Rubicant]

Originally Posted by peter12

A large house is mostly an unnecessary inconvenience. Studies have shown that the vast majority of time is spent in the kitchen or dining room and that small, ancillary rooms are empty most of the time.

Seconded. We bought a pretty decent sized home (~2300 sqft) and don't really use half of it even after adding 2 kids to the mix.

Half of our first floor (living and dining room) are used maybe 5 times per year.

Our kids each have their own room but prefer to sleep in the same bed right now (age 3 and 6) so one bedroom upstairs is largely vacant. I feel we'll gradually use more of the house as the kids get older, but who knows.

We honestly under bought compared to essentially everyone with similar income in our area and quite often get asked whether we are going to upgrade our house. I have no interest in keeping up with the Joneses - this house more than adequately meets our needs and allows us financial flexibility.

Buying a house (or car for that matter) to signal how well off you are is a mistake many people make.

[undercoverbrother]

Originally Posted by Rubicant

Seconded. We bought a pretty decent sized home (~2300 sqft) and don't really use half of it even after adding 2 kids to the mix.

Half of our first floor (living and dining room) are used maybe 5 times per year.

Our kids each have their own room but prefer to sleep in the same bed right now (age 3 and 6) so one bedroom upstairs is largely vacant. I feel we'll gradually use more of the house as the kids get older, but who knows.

We honestly under bought compared to essentially everyone with similar income in our area and quite often get asked whether we are going to upgrade our house. I have no interest in keeping up with the Joneses - this house more than adequately meets our needs and allows us financial flexibility.

Buying a house (or car for that matter) to signal how well off you are is a mistake many people make.

Wait till your kids get older, they will take up more space.

[HockeyIlliterate]

Originally Posted by DoubleF

Even if we assume that someone "only" wastes $500 per month (grab gum, grab snack, random purchase that was used once and collects dust, extra eat out, cigs/alcohol, spoiled groceries, heat>sweater, make up etc.), that's $6K per year or $60K a decade.

People should look at this not in terms of what it costs now, but what it costs later.

Spending a sustained $6,000 a year requires, at a minimum, $150,000 in principal. Which is to say, if you believe in the 4% safe withdrawal rate (I don't, by the way), you need $150,000 to support $6,000 in annual spending.

It might not take that much work to earn $6,000, but sure takes a lot more work to save $150,000. With income taxes and the like, saving $150,000 probably requires earning at least $187,500. Or, alternatively, earning and saving something less than that amount, but not touching it and let compounding work its magic.

Either way, that $6K in spending is going to cost you a lot in terms of time and effort in the future in order to keep the $6K expenditure going. That hedonistic treadmill is an unforgiving and demanding bear.

Only you can determine if, as they say, the juice is worth the squeeze, but most people will admit that most expenditures aren't really worth it. Not worth the initial outlay of money, not worth the ongoing expense to keep it in terms of storage and housing cost, not worth the work and effort to earn the money that was used to buy it in the first place or that is needed to keep it.

There is some truth to the comment that "people spend money that they don't have to buy things that they don't need to impress people they don't like."*

But at the same time, it is becoming exceeding difficult for middle class (or lower) people to get started on a secure financial footing when employers demand pieces of paper that cost thousands of dollars for jobs that do not need them, when housing supply is being restricted to favor those who already have a house, and there is a tendency amongst those in government to privatize profits but socialize losses.



* This comment, or a variation of it, is often attributed to Dave Ramsey, but he wasn't the first to come up with it.

[DuffMan]

Originally Posted by Jacks

Instead of using your bank card or credit card put $40 cash in your pocket and use that for small daily expenses. You'll find out in a hurry how much money you are pissing away on little things every day.

And not earn travel points or cash back?

No thanks

[puckedoff]

Originally Posted by Jason14h

The drunken sailors aren't posting! They are too busy buying bottled water or Starbucks on their breaks !

Originally Posted by TheIronMaiden

Cuttin loser laps around the block while listening to satellite radio.

I feel personally attacked

Originally Posted by DuffMan

And not earn travel points or cash back?

No thanks

And have to deal with change? Yuck.

I find I actually spend money faster when I have a wallet full of cash versus when it is just a lonely credit card in there.

[Jason14h]

Originally Posted by stone hands

i dont think oversaving is a thing, you are just accelerating your retirement date which is probably the best use of money i can think of

Oversaving as in, I didn't die having spent my last penny. Technically you over-saved for your well being.


Retiring early is amazing. Most people who retire early just shift their time to making money doing things they like, and die with $$ in the bank!



This is just my experience. Most people I talk to have almost no saving, or are great at saving (almost addicted to frugality). Very few have the balance where they live for both today and retirement.

[Locke]

Originally Posted by undercoverbrother

My money will go farther in Sierra Leone, lovely climate as well.

Hey! Retiring from my Glorious career as a Tax Accountant to begin my new career as the Glorious Leader of a small war-torn, blood-soaked subsaharan African nation was my plan first!

[GoinAllTheWay]

So here is a question I've been meaning to ask regarding large purchases like a car.

Several people have posted already how you need to budget based on what something costs total, not what it costs per month.

That's the biggest disconnect I've had with budgeting, how do you figure out how much of something you can afford without taking into consideration what impact that has on your monthly budget?

I realize you need to take term and interest into consideration. But with something like a car, I have no idea how much I could afford to take on without seeing how it impacts my monthly budget.

[HockeyIlliterate]

Originally Posted by GoinAllTheWay

So here is a question I've been meaning to ask regarding large purchases like a car.

Several people have posted already how you need to budget based on what something costs total, not what it costs per month.

That's the biggest disconnect I've had with budgeting, how do you figure out how much of something you can afford without taking into consideration what impact that has on your monthly budget?

I realize you need to take term and interest into consideration. But with something like a car, I have no idea how much I could afford to take on without seeing how it impacts my monthly budget.

Have you considered the idea of paying cash for a car?

Doing so makes things a lot simpler: No need to worry about interest rates, monthly costs, or the like. All you care about is the out-the-door price for the car.

[Weitz]

Originally Posted by puckedoff

I feel personally attacked



And have to deal with change? Yuck.

I find I actually spend money faster when I have a wallet full of cash versus when it is just a lonely credit card in there.

I used to be that way. But now I think I carry cash all month and it only gets used at a montly poker game I play in.

[stone hands]

Originally Posted by GoinAllTheWay

So here is a question I've been meaning to ask regarding large purchases like a car.

Several people have posted already how you need to budget based on what something costs total, not what it costs per month.

That's the biggest disconnect I've had with budgeting, how do you figure out how much of something you can afford without taking into consideration what impact that has on your monthly budget?

I realize you need to take term and interest into consideration. But with something like a car, I have no idea how much I could afford to take on without seeing how it impacts my monthly budget.

buy one used in cash, problem solved

[Weitz]

Originally Posted by HockeyIlliterate

Have you considered the idea of paying cash for a car?

Doing so makes things a lot simpler: No need to worry about interest rates, monthly costs, or the like. All you care about is the out-the-door price for the car.

Paying cash, while easier, isn't always the best use of your money. Especially if you are looking at a new vehicle.

But really I think you need a better handle on your finances if you don't know what adding 3, 4 or $500 a month to your bills would do.

[Sliver]

Originally Posted by GoinAllTheWay

So here is a question I've been meaning to ask regarding large purchases like a car.

Several people have posted already how you need to budget based on what something costs total, not what it costs per month.

That's the biggest disconnect I've had with budgeting, how do you figure out how much of something you can afford without taking into consideration what impact that has on your monthly budget?

I realize you need to take term and interest into consideration. But with something like a car, I have no idea how much I could afford to take on without seeing how it impacts my monthly budget.

You start saving before you need it, not when you need it. Like if you are anticipating needing a car by next June, start saving as much as you can now and in June however much money you have saved is how much you have to spend on a car. It's that simple.

[Jason14h]

Originally Posted by GoinAllTheWay

So here is a question I've been meaning to ask regarding large purchases like a car.

Several people have posted already how you need to budget based on what something costs total, not what it costs per month.

That's the biggest disconnect I've had with budgeting, how do you figure out how much of something you can afford without taking into consideration what impact that has on your monthly budget?

I realize you need to take term and interest into consideration. But with something like a car, I have no idea how much I could afford to take on without seeing how it impacts my monthly budget.

Considering the hit on your budget is fine. But I can sell you a $100,000 car that fits into your monthly budget. You will just be paying me until you die with interest (relatively)



This is why dealerships love someone who walks in saying "I can afford $400 a month, what is the best I can get"

[TheIronMaiden]

Originally Posted by peter12

Are people really bothered by how much other people spend?

It doesn't bother me how much people spend, but I am not impressed by how many things people buy. For example, I could never marry a Knick-knack haver, or someone who loves inflatable 'holiday' ornaments. Not everyone- but a lot of people have houses full of ####. The have rooms dedicated to boxes full of things they never needed.

[burn_this_city]

Treat the purchase like you're paying cash and whittle the price down as much as possible. But don't put cash into a depreciating asset, if you have the cash for a new car you should be putting it in the market for a return and leasing or financing for a low rate like 1.9-2.9%. Rich people use other people's capital to finance depreciating assets.

[Rubicant]

Originally Posted by undercoverbrother

Wait till your kids get older, they will take up more space.

I imagine so. Right now their 'stuff' takes up a ton of room. It's hard to relay to grandparents, but I wish they would buy less 'things' for the kids - they play with it for a bit, lose interest, and now it's just taking up space until we can figure out how long we should keep it to not offend before getting rid of it.

It seems so cold and calculating, but if they really want to spend x dollars on the kids, it would be so much more helpful to just sock it away in an investment account for them. Imagine having a huge lump sum of money when starting your career to have a down payment on a house or equivalent use - it would be a huge leg up.

You don't get the same instant gratification of seeing them react to the stuff you give them though...

[Rubicant]

Originally Posted by GoinAllTheWay

So here is a question I've been meaning to ask regarding large purchases like a car.

Several people have posted already how you need to budget based on what something costs total, not what it costs per month.

That's the biggest disconnect I've had with budgeting, how do you figure out how much of something you can afford without taking into consideration what impact that has on your monthly budget?

I realize you need to take term and interest into consideration. But with something like a car, I have no idea how much I could afford to take on without seeing how it impacts my monthly budget.

You need to budget based on what it costs per month, but you should not ignore the total cost.

Monthly cash flow matters, but if you end up paying 45k for a 30k car because you amortized it for way longer than you should that is painful.

Car finance people know that most people only look at the monthly payment so they talk them into way too long a term to afford a car they shouldn't.

[GoinAllTheWay]

Originally Posted by Jason14h

Considering the hit on your budget is fine. But I can sell you a $100,000 car that fits into your monthly budget. You will just be paying me until you die with interest (relatively)

Ya, that's where taking the cost of the loan into consideration is important. OK, so my disconnect isn't as bad as I thought.

I do need a new car, and I could certainly pay for a brand new one in cash, just struck me as not doing it right I guess? Put down a healthy down payment, make sure the monthly payments fit into my budget and then invest a good chunk of the remaining money.

And I would almost certainly by used. 2 yrs old is perfect I think.

At times I feel like I have to much sitting in the bank doing nothing productive but the though of just dumping a majority of it into a new vehicle strikes me as bad use of resources.

[GGG]

Originally Posted by Rubicant

I imagine so. Right now their 'stuff' takes up a ton of room. It's hard to relay to grandparents, but I wish they would buy less 'things' for the kids - they play with it for a bit, lose interest, and now it's just taking up space until we can figure out how long we should keep it to not offend before getting rid of it.

It seems so cold and calculating, but if they really want to spend x dollars on the kids, it would be so much more helpful to just sock it away in an investment account for them. Imagine having a huge lump sum of money when starting your career to have a down payment on a house or equivalent use - it would be a huge leg up.

You don't get the same instant gratification of seeing them react to the stuff you give them though...

Ask them for receipts to take it back and put money in RESP. It’s awkward once but in my case it worked to cut down but not eliminate the amount of crap.