This week, I have learned that our water tax bill just jumped from about $90 to a whopping $600 because of a small plumbing issue that was leaking fresh water down the drain twenty-four, seven for the past year!!! I never looked into the issue before I got a real incentive to do so. Honestly, I heard a strange noise coming from a pipe but never looked into it. In the end, I fixed the problem myself for a total cost of ten dollars.
Most issues can be fixed cheaply if you ask the right questions to the right people. I have zero experience in plumbing and thought I had to call in a plumber. They usually charges at least $50 just to show up then, $45 to $150 per hour of labor but instead, I called a local plumber and described my problem, simply asking which parts I would need to fix it. I then visited our hardware store and chatted with one of their oldest guys on the floor to seek his knowledge. He explained to me the proper way to attach the parts and my total cost ended up to be right under $10.
If you are ready to get your hands dirty, you can fix almost anything around the house for a fraction of the price. Ask the pros or search YouTube for some How To videos, they are some on every topic imaginable. In the end, it only took me half an hour to fix my issue.
Any house owner should be attentive to his property. Listen to new noises, look for new cracks. Fixing it early on will always be easier and cheaper than if you wait until a problem becomes critical.
Moral of the story is; if something breaks, fix it now. You do not always need to outsource all your house maintenance, you will learn a lot and save a ton!
Fix your finances early on
The same goes with your personal finances, if there is a leak somewhere, fix it now. Take the time to rethink your financial life to optimize it and attain your goals faster. So many people and spending away without thinking about the true meaning of their expenses. Living their life buying things to impress people they don’t know with money they don’t have.
Goals and happiness
The first step of our financial makeover is to clearly define your goals and to create a plan to attain each goal. Money is often thought of as an antagonist, an enemy that keeps you from doing what you want to but it is exactly the opposite; Money is a tool to achieve your goals. Ultimately, money can be your tool to financial freedom. Money should make you happy, not trap you in a lifestyle influenced by peers and marketing agencies.
I suggest writing down your goals and going back on them at least once a year, depending on the time frame of your goal, to reassess.
Having long-term goals is a great start and can be a great motivator. Retiring early, for example, is certainly a huge priority for me and this pushes me to outperform at work, pursue side-hustles, and stay on target with my savings. However, I am also thinking of my other goals to work on projects I love, travel the world, and spend time with my family. Balancing all of these, I get to fully enjoy the journey towards early retirement, while living a life of happiness.
Once this is done, start writing down everything that truly makes you happy. This might be a hard exercise but it will truly enlighten you in later steps.
Track your finances
Do you know how much you are actually making per year? Do you know how much you spent on food last month?
Now that you know what your goals in life are, you need to know if you are on the right track to attain them. I highly suggest Personal Capital to track all your accounts in a simple, clean, app that lays out all your earned income and spending. Once you know how much is coming in and where it is going out, you can then start optimizing your financial life to attain your goals. Personal Capital offers a great free tool to set monthly spending targets and easily budget all of your expenses.
Fix the leaks
Start working towards your dreams instead of working simply to pay the bills. If you feel trapped in a consumerism hamster wheel; buying things you feel you deserve since you work so hard and working so hard to pay for all those things, know that it is never too late to change. Now that you see where all your money is leaking, you can go back to your happiness list and see which expenses are truly making you happier.
Break down your expenses in 3 general categories; Activities that make you happy, Things that make you happy, and stuff you have no choice to pay for. The latter, should be optimized to maximize the other two. For example, I do not get much joy out of driving, so we own 10 years old cars that gets us from point A to point B. Even if manufacturers spend billions on advertising (the big-3 spends almost 3 billion a year each), I am not inclined to spend my hard-earned dollars on a brand new car just to keep up with the Jones. By optimizing our transportation expenses, we are able to enjoy life and focus on our goals. To come back to our example, we have a super economical Honda Fit, but we also own a mid-size SUV that consumes twice as much gas and did cost more to purchase. It may not be the cheapest way to get from A to B but it is a great contributor to my happiness since it has all the room we need to enjoy all the outdoor sports we enjoy. Would a newer SUV make me even happier though? I do not think so.
Once you categorized your expenses, go back to your goals list and see which expense is compromising your greater life plans. Once you start patching up the leaks in your budget, you will find yourself with more flexibility, more power over your life, and more happiness.
Stay on top of things
Just like a house, your budget needs maintenance and refining. Revisit your goals and happiness list once in a while and stay on top of your finances. Add to your lists, tweak them, and never forget to enjoy the journey. If you are only focusing on the end destination, you will give up long before the finish line. Hopefully, you will be able to maximize everything on your happiness list while completing your goals list within the time frame you imagined, Mr. Xyz.