The market was essentially flat last week, as traders weigh inflation reports and ongoing geopolitical tensions. If you’re worried about putting money into the market, consider buying in over time, with pre-determined amounts moving from cash to investments each month.
If you’re on social media, you’ve probably heard all the influencers criticizing people for buying coffee or eating out. Looking at your spending, to see if it aligns with your values and goals, is a good thing. For most of us, it’s not that we can’t or even shouldn’t be eating out or shopping or indulging in a hobby, it’s that you could choose to put that money towards something else you want more, like a house, a boat, or travel.
At the end of the day, if you’re paying off your credit cards every month, the $7 latte is not what impacts you financially. It’s the big ticket items that really matter.
We’ve all heard the term “house rich and cash poor.” While it’s okay to stretch a bit for the first year or two with a new home, in general, your housing costs should be no more than 30% of your net income. And while the move from a starter home to a house that accommodates a growing family makes sense, continuing to upgrade to bigger and better homes can strain cash flow. Warren Buffet, the billionaire founder of Berkshire Hathaway, famously lives in the same five-bedroom home he purchased in 1958.
If you’re renting, consider a smaller place, or having a roommate if your housing costs exceed 30% of income.
Transportation is another area that can be controlled to a certain extent. Purchasing a certified pre-owned vehicle, and keeping that car for seven to ten years, can free up space in your budget for savings and other goals. Happiness may spike when you first purchase a new car, but for most of us, our car does not have a positive impact on our overall satisfaction with life.
Education does have long-term impacts. Education after high school typically increases your lifetime earnings, but that is partially dependent on your course of study. Many degrees do not lend themselves to higher paying careers. For the most part, your undergraduate alma mater also does not significantly impact earning potential. So taking on six figures of debt for a degree from a private or out-of-state public school can set you back on many life goals. You’re ten steps behind before you even start.
These large items have a bigger impact on your cash flow and ability to save than your $30 delivery order. Controlling these expenses also makes it easier to manage a financial setback such as job loss or illness.
Your action item this week is for everyone with an account at Fidelity in 2024. There is a class action lawsuit due to a data breach. See if you’re eligible at fidelitydatasettlement.com.
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CovingtonAlsina is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.