During your lifetime, there will be certain expenses that consume a lot of your earnings each month. By knowing exactly what these are, you can be better prepared to deal with them in the best way possible. Also, before you make any big expenditure, you will obviously want to think long and hard about whether you are making the right decision and what the financial implications will be. It has been estimated that these five expenses will consume over 50% of your earnings during your life. So, without further ado, here they are.
Of course, your home is going to come right at the top of the list. Not only will the actual price of the property be a big hit that you will be paying off for years in the form of a mortgage, you will also have to pay for the general upkeep and renovations that need doing over the years. However, by owning a home, you always have a degree of financial security and you also have the option of applying for a homeowner loan. But if you have not bought one yet, it is important that you don’t bite off more than you can chew financially.
While your home rises in value over the years, your car inevitably goes down. And like a home, there are all kinds of maintenance and upkeep costs including fuel, repairs, maintenance, insurance etc. If you are trying to live a more frugal lifestyle, you probably won’t want to buy a brand new car but you also won’t want one that is going to be constantly breaking down and will cost you more money this way.
It has been estimated that the average cost of raising a child is more than £200,000 in the UK, but they are worth it, aren’t they? This cost also only applies up to the age of 18 so doesn’t include any further education costs which have been quickly rising in recent years. But if you instil some frugal habits in them from a young age, they are much more likely to carry these with them during the rest of their lives.
As just mentioned, this is something that especially applies to the current young generation if they want to go to university, but there are also all kinds of other educational costs out there, including everything from piano lessons to evening language classes.
Your Retirement Fund
A simple rule to follow when you are thinking how much money you will need to retire is your current income multiplied by 25. This way, you will be able to maintain your current standard of living during your retirement. Of course, hopefully your living costs will be lower then (kids have moved out, mortgage paid off) but you also have to consider that people are living a lot longer than they once were. And, as they say, it is never too early to start saving for retirement!
One of the stresses you may encounter during retirement is a reduction in income. You can solve that problem by applying for a reverse mortgage on your home. It is not like a traditional mortgage because you will continuously receive money from it until you borrow the most you are allowed to borrow. That means you will get money from your reverse mortgage lender monthly instead of owing it back, as you would with a standard home loan. The conditions of the reverse mortgage are you must take out the loan on the home you are living in, not another property. You must also be at least 62 years old to qualify. When you leave the home, you must pay the lender back or allow the sale of the home so the lender can be recovered some or all of the amount remaining.
Disclosure: This is a collaborative post.