There are things you need to pay for, like your home and car, and there are things you may want to pay for like a cottage or boat, or maybe a new RV or four-wheeler.
Toys, indulgences, lifestyle accessories, by whatever name, are the fun things that add excitement and enjoyment to your life. But you still have to pay for them. So here are some tips for financing your fun:
Pay yourself first It’s simple: save an amount each pay period that you can comfortably afford. It can be a fixed-dollar amount or a percentage of your income (three per cent is a good guideline). You probably won’t miss the money and your savings will grow nicely.
Max your savings growth Move your money out of low-interest bank accounts and into investments that generate higher returns yet are easily accessible once you’ve reached your savings goal. Money market mutual funds can be a good choice. Guaranteed Investment Certificates (GICs) or term deposits can also be a good choice but, in exchange for a higher interest rate, your money is locked in for a fixed period.
You might also consider government savings bonds. They are cashable at any time (but with a small interest penalty if you do so before maturity) and might be available through an automatic payroll deduction program that adds to your pay-yourself-first strategy. Tax Free Savings Accounts (TFSAs) can also provide ready, tax-exempt cash when you need it.
Save first, save later When you save before you buy, you’ll also save on what you buy, by having the luxury to make your purchase when the time and price are right, like at the beginning or end of a season when merchants are clearing stock.
Money deals, credit steals Avoid financing your fun by using high-interest credit cards or by repurposing money from the investments or savings you’re counting on for other life goals, like a comfortable retirement. Buy what you can afford when you can afford it with cash on hand. You’ll not only eliminate the costs of financing but you may also be able to negotiate a better deal when you’re paying with real money.
Whether you’re saving for fun things or to realize your lifelong dreams, a professional adviser can help you get there with strategies tailored to your needs and your unique situation.
J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc. His column appears every Wednesday.