Keeping up with the Joneses
by Contributed - Story: 97638
Sep 8, 2013 / 5:00 am
Sep 8, 2013 / 5:00 am
Every day we encounter invitations to buy, buy, buy! Maybe you’ve just noticed that new car in the driveway next door and see a terrific new car and you think, “Hey, if the Joneses can afford that, then I can, too.” Next thing you know, you’re looking up from under a mountain of debt.
- Start with a budget that makes a clear distinction between ‘want’ and ‘need’. Make a comprehensive list of all your necessary and discretionary expenses. List your sources of income and, as much as you can, trim your expenses to fit your income. Try to include an amount ‘in hand’ to save and invest.
- Organize your spending into three buckets - ‘past’, ‘present’ and ‘future’. ‘Past’ spending includes loans and purchases made with credit cards. ‘Present’ spending includes your daily living expenses. ‘Future’ spending includes education savings for your kids and retirement savings for you and your partner.
- Use credit wisely. It’s easy to apply for credit – but before you do, look critically at your current financial situation. It might be better to tighten your budget for six to twelve months before making any major purchases -- and then you’ll be in a position to pay cash for them.
- Know your TDS. When you apply for a mortgage, your lender is required to apply the Total Debt Service (TDS) ratio to help ensure an excessive amount of your cash flow is not eaten up by your debt load. The TDS ratio measures the percentage of your gross annual income required to cover mortgage payments, property taxes, heating and other household costs plus other monthly obligations such as car and personal loans, credit card payments, spousal/child support, and so on. Generally, the highest allowed ratios are approximately 40-42% of your gross income.
No, you don’t need to keep up with the Joneses, but if you want to make sure you’re keeping up with your own financial dreams, talk to your professional advisor today.
This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), and Investors Group Securities Inc. (in Québec, a firm in Financial Planning) presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.
Read more Financial Planning Made Easy articles
The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.
- Pay attention to your Beacon Dec 8
- Money to minors: a major issue? Dec 1
- Mortgage insurance: you never know Nov 24
- Today’s decisions could cost tomorrow Nov 17
- Year-end tax reminders and tips Nov 10
- Cascading life insurance Nov 3
- Incorporation for professionals Oct 27
- U.S. estate taxes and you Oct 20
(Click for RSS instructions.)