A recent study from credit reporting agency TransUnion states that the average Canadian's debt load is increasing at an alarming rate. Canadians, on average, have: $19,228 racked up for Auto Loans, $3,600 in Credit Card debt, and have $34,000 owing on lines of credit... and that's without even talking about mortgage debt!
Why are we so stupid with our money? I think there are two big reasons to explain this.
Firstly, people are ignorant about their money. I use the word 'ignorant' because it sounds nicer than 'stupid'. People are unaware of what they're bringing in and what they're spending their money on, and they typically don't really care or want to know anyway. I believe the saying is, "Ignorance is Bliss".
Secondly, people are incredibly lazy and undisciplined. They want what they want, when they want it. Maximum pleasure for minimum effort. Sure.. I get it.. It sounds awesome right? I'm guilty as charged for wanting some super awesome instant gratification now and then. But, every so often you have to get a bit tough with yourself and for God's sake show some self restraint!
In my experience, all it takes is making a few small changes one step at a time... every bit counts!
Here are the Top 10 things you, as a Canadian, are probably wasting money on:
10. ATM Fees
These days ATM fees are anywhere from $1.50- $5.00 per transaction. Hidden costs exist in this transaction because not only does the bank charge you for the using the ATM but, you also get charged for the transaction from the ATM owner. It's a double whammy! For example, you withdraw $20 from a bar ATM. The bar charges $5 per transaction, and your bank charges you $3 for using the ATM. Suddenly your $20 withdraw becomes $28! Yikes! Also, checking your balance on an ATM can also incur extra costs as it's sometimes charged as a separate transaction on it's own.
9. Buying lunch at work
People seem to think nothing of dropping $5 or $10 bucks for lunch everyday. But it really adds up in the long run! Let's say, for example, you work at your job or career for 20 years... and let's give you the benefit of the doubt and say that you only buy your lunch at work 2 times a week. After 20 years that still adds up to $20,000! In other words, 'Brown Bag' it people!
8. Paying the minimum amount due
I really don't think people grasp the danger in paying only the minimum amount due. In some cases, the debt would take 100 years to pay off if you actually did the math.
Credit cards all have an APR (Annual Percentage Rate). This is the interest you get charged on your debt every year. For example, let's say you have $1,000 in credit card debt and the APR for your credit card is 18%. That means that every year you pay $180 in interest alone (1.5% or $15 per month). Let's say your Credit Card calculates their minimum monthly payment as 2.5% of the balance. So... when you pay your minimum payment of $25, only $10 is being applied to the principal amount, and $15 is being paid in interest. At this rate it would take you 13 years to pay off your balance and you would spend over $1,100 in interest alone.. more than doubling the initial amount borrowed!
There's also something known as a "Balance Transfer Fee" that credit cards charge when you transfer your balance from one credit card to another. This fee ranges anywhere from 1-5% of the total amount transferred. Let's say your transferring $5,000 from one card to another. You could end up paying $250 just for the transaction alone!
7. Unused Gym memberships
New Years Resolutioners are well known for this big money blunder! "Good intentions pave the road to Hell"... or better yet, financial ruin! It's not uncommon for people to drop anywhere from $75-$100 per month on a gym membership but if you're not regularly going to the gym this is a huge waste of money! Personally, I've invested in a home treadmill (on sale from Canadian Tire) and a bench with some free weights (off Kijiji). For an initial investment of about $1300 I've saved on gym membership fees (for the past five years) adding up to a total savings of $4500!
6. Tim Horton's Coffee
Ah yes.. A Timmies! The Kryptonite of every shift working, blue collar, patriotic Canadian! But, this caffeine infused, True North strong and free, hot beverage of choice is a sneaky money leak. At about a toonie a cup it's easy to buy and seems pretty insignificant. Let's say you only buy one Timmies a day (I know some people who buy 4 a day!). Over 20 years that's a total of $14,600! Now... let's say instead, you invested that toonie every day. After 20 years you would have made $34,846.45!
Makes you think twice about that little, patriotic caffeine jolt ;)
As a person who works in a downtown location with limited 'free parking' options I completely understand the convenience factor with this expense. However, for an extra 20-30 minutes of walking per day I save big time! And who couldn't use a little more daily exercise anyway, right?
Where I work the going rate for parking is either $16 a day, or $80 a month. Let's say I go with the monthly plan because it's less expensive... over 20 years that adds up to $19,200!!
Instead, let's say you choose to park for free and walk about 15 minutes to work. Not only would you gain an extra 30 minutes of exercise every day (and lose excess body fat in the process), but invested, that same $80 every month over 20 years would have made you $45,825.47!!
4. Eating out at restaurants
The average person in Ontario spends $2,057 per year on eating out. If you're a social person who likes to hit the party scene every week than you can easily double or triple that number.
Let's say you are able to get a bit more disciplined and cut this cost in half and save $1000 a year (just spending $20 LESS a week). Over 20 years that money invested would earn you $47,734.86!
"I've got 500 channels and nothing good to watch!"... sound familiar?
Cable T.V. these days costs about $75-$100 per month depending on your cable package and provider. This really adds up over time, not only financially but health wise as well. A more cost efficient route is signing up for Netflix which offers not only hundreds of T.V. shows but great movies too for only $9 a month. Hulu is also another good option too for internet television and movies and is only $8 per month!
Over 20 years that's a savings of $18,000! The same amount invested over 20 years would earn you $42,961.38!!
2. Lottery & Bingo
Economists like to call this the "Stupid Person Tax".
It's not uncommon these days to see people dropping anywhere from $20-$100 a week on gambling. Even though statistically you're more likely to get stuck by lightening it doesn't stop people from throwing their money down the drain at a rapid rate.
If the thought of winning the Jack Pot sounds good to you then invest that Bingo money now!
If you really want to 'win big' consider taking that $20 a week you might spend on lottery tickets or Bingo and invest it. After 30 years, you would hit 'the jack pot' and make $113,032.71!!! .. and probably still would have never been struck by lightening ;)
"In 2002, tobacco usage cost Canadians about $17 billion, including $4.4 billion in direct health-care costs." (Alberta Health Services)
Let's say, you buy a pack of cigarettes ($10) a day. Over 30 years you would spend a total of $109,500. If you took that same amount and invested it, over 30 years you would have earned $396,701.33! Where I live that could buy you a 4000 sq foot brand new home with all the fancy up grades!
Well, there you have it! It's all a bit over whelming.. even for myself, but just think of it as 'food for thought', and take it one small step at a time. Every bit counts!