There's Economic Poetry In Having A Good Savings Plan
Sun Herald
Sunday January 15, 2006
"THE art of living easy as to money is to pitch your scale of living one degree below your means," said Sir Henry Taylor, the 19th-century English poet. This advice is well worth taking today. Alison and Damien, like many Generation X couples you have not understood the essence of saving. You have established an investment property in Geelong, which is good, but all of your wealth creation is via debt rather than savings. This has the potential to blow up on you.
Rather than living to your means you have succumbed to the temptation to live life to the full and then some. New York has all the temptations for those with expensive lifestyles. You have borrowed heavily and the bulk of your sizeable incomes is going in interest payments, holidays and living expenses. Mentally, it is hard to think of savings while you have a cocktail of debts. Gearing is seen as an attractive way of fast tracking investment returns but you need to be aware of the risks when there is nothing put aside for a rainy day. The economy of gaining loyalty points for the use of the credit card can be offset by the temptation of easy credit and the overspending that it encourages. One solution without incurring too much pain is to not budget for the bonus element of Damien's package and to treat it purely as savings. This would force you to cut your cloth to a lower lifestyle. When the bonus comes in it can then be allocated straight to the savings account or towards repayment of debt. Incorporating this into a written plan and not having the option to dip into it may cause short-term pain, but the discipline will allow you to be much better off in the medium term.
© 2006 Sun Herald