The Burden of a Damaged Paycheck

February 1, 2023

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Andre & Mara Simoneau

Andre & Mara Simoneau

Financial Consultants

Lynx Creek Cir

Frederick, CO 80516

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January 30, 2023

Is a home really an investment?

Is a home really an investment?

The housing market has experienced major peaks and valleys over the past 15 years.

If you’re in the market for a new home, you might be wondering if buying a house is a good investment, or if it even should be considered an investment at all…

“Owning a home is the best investment you can make.”

We’ve all heard this common financial refrain: “Owning a home is the best investment you can make.” The problem with that piece of conventional wisdom is that technically a home isn’t an investment at all. An investment is something that (you hope) will earn you money. A house costs money. We may expect to save money over the long term by buying a home rather than renting, but we shouldn’t (typically) expect to earn money from buying a home.

So, a home normally shouldn’t be considered an investment, but it may offer some financial benefits. In other words, buying a home may be a good financial decision, but not a good investment. A home may cost much more than it gives back – especially at the beginning of ownership.

The costs of homeownership

One reason that buying a home may not be a good investment is that the cost of homeownership may be much higher than renting – especially at first. Many first time homebuyers are unprepared for the added expense of owning a home, plus the amount of time maintaining a home may often require. First-time homebuyers must be prepared to potentially deal with:

  • Higher utility costs
  • Lawn care
  • Regular maintenance such as painting or cleaning gutters
  • Emergency home repairs
  • Higher insurance costs
  • Private Mortgage Insurance (PMI) if you don’t provide a full 20 percent down payment

A long term commitment

Another problem with considering a house as an investment is that it may take many years to build equity. Mortgages are typically interest heavy in the beginning. You can expect to be well into the life of your mortgage before you may see any real equity in your home.

Having the choice to move without worrying about selling your home is a benefit of renting that homeowners don’t enjoy. The freedom to move for a career goal, romantic interest, or even just a lifestyle choice is mostly available to a renter but may be out of reach for a homeowner. So, be sure to consider your long term goals and aspirations before you start planning to buy a house.

When is buying a home the right move?

Buying a home in many cases can be an excellent financial decision. If you are committed to living in a specific area but the rent is very high, homeownership may have some benefits. Some of those may be:

  • Not having a landlord make decisions about your property
  • Tax savings
  • Building equity
  • A stable place to raise a family

Buying a home: Not always a good investment, but may be a good financial decision

Although buying a home may not pay you in high returns, it can be an excellent financial decision. If owning a home is one of your dreams, go for it. Just be aware of the costs as well as the benefits. If you’ve always wanted to own your own home, then the rewards can be myriad – dollars can’t measure joy and the priceless memories you’ll create with your family.

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This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Market performance is based on many factors and cannot be predicted. Any examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed financial professional, accountant, realtor, and/or tax expert to discuss your options.

December 14, 2022

Home Insurance: A Primer

Home Insurance: A Primer

A properly set up home insurance policy can be peace of mind.

Home insurance is designed to help you financially if something goes wrong with your home. It’s one of the most important insurance coverages you can have because it protects the very place that protects you.

Home insurance is a contract. Your policy lays out what it covers and what it doesn’t cover. It also includes your rights and responsibilities and those of your home insurance company. So how do you know if you have the right type of home insurance policy? How can you help ensure your home insurance will cover what you need it to cover? Read on to learn some basics.

What does a home insurance policy cover?

Basically, home insurance pays to repair or replace your home or property if it’s damaged in a covered loss, such as theft or fire. A proper home insurance policy also should offer liability protection if someone is injured on your property and then sues you.

Do you have to purchase homeowner’s insurance?

Homeowner’s insurance may be required if you have a mortgage. Your bank will want to make sure the asset is protected, so they’ll likely require you to purchase a homeowner’s policy. They’ll also want to see proof of coverage – sometimes called a binder or an Evidence of Insurance certificate. Such a document will list the insurance limit, deductible, and declare the bank as the mortgage holder.

How much insurance do you need on your home?

The limit for your home policy is based on the cost to replace your home – not the value of the home – and on several other factors. Considerations for replacement cost include:

Construction: The replacement cost of your home will depend greatly on the construction. Is it a wood frame? Masonry? Concrete block? What is the square footage? How about roof construction? All these construction features will help determine the replacement cost of your home.

Personal property: The policy limit for your personal property typically defaults to a percentage of the amount for which your home is covered. For example, if your home is insured for $100,000 and the percentage is 50%, the default personal property limit would be $50,000.

Bonus tip: Highly valuable personal property is excluded from typical homeowner policies. Special property such as antiques, fine art, or jewelry may be covered only up to a certain sublimit. If you have highly valuable property stored within your home, talk to your insurance professional about getting the proper coverage for these items.

Liability insurance: As stated, a basic home insurance policy should come with some liability coverage to protect you if you end up in a lawsuit. Such a suit may stem from someone getting injured on your property.

Bonus tip: Homeowners should have some extra liability protection. An “umbrella” liability policy can add more liability coverage in case you end up in a lawsuit.

What type of deductible should I select?

A typical homeowner policy deductible is between $500-$1,000 (this can vary by state).¹ But there are options for $5,000 all the way up to $100,000 deductibles. Some policies offer percentage deductibles where the deductible is counted as a percentage of the policy limit. For example, if your home is insured for $150,000 and you carry a 10% deductible, your out-of-pocket cost in the event of a claim would be $15,000.

Many homeowners opt for a high deductible to save on the cost of the policy. Bonus tip: Select the highest deductible you can afford. Just keep in mind that if you have a claim, you are responsible for paying the deductible. If the damage is less than the deductible, you will have to make the repairs without the help of insurance. Know your risks and select the right policy.

Home insurance policies don’t cover everything. They contain exclusions. For example, many homeowners policies don’t cover flood damage. Flood insurance must be purchased separately. If you live in a coastal area or near a large body of water, consider purchasing a flood insurance policy.

Bonus tip: Flood insurance has become more important for homeowners in recent years. Flooding can cause catastrophic damage and can also affect homeowners who are not in a so-called “flood zone”.

Knowledge is power. The more you know about homeowners insurance, the better prepared you’ll be if something goes wrong with your home. Get to know your policy’s limits, coverage, and deductibles, so you can help ensure you have the coverage you need, when you need it.

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Please consult with a qualified professional and read all of your homeowners insurance documents carefully. Make sure you understand your policy(s) and know what situations are covered or not covered.

¹ “Average Homeowners Insurance Deductible,” Jeff Gitlen, LendEDU, Aug 31, 2021, https://lendedu.com/blog/average-homeowners-insurance-deductible/

August 31, 2022

A Beginners Guide to Saving and Shredding Documents

A Beginners Guide to Saving and Shredding Documents

It’s time to manage all those papers that are taking up space in your filing cabinets!

But how? Which documents should you preserve? Which ones should you shred? Here are 11 helpful tips on what to do with tax documents, legal documents, and property records.

Documents to keep.

At the top of this list? Estate planning documents. Your will, your living trust, and any final instructions should be carefully labeled, stored, and protected. Your life insurance policy should be safeguarded as well.

Records of your loans should be preserved. That includes for your mortgage, car and student loans. Technically, you can shred these once they’re paid off, but it’s wise to keep them around permanently. Someday you may have to prove you’ve actually paid off these debts.

Tax returns.

Here’s a trick—keep tax returns for at least 7 years. Why? Because there’s a 6 year window for the IRS to challenge your return if they suspect you’ve underreported your income.¹ Keep your records around to prove that you’ve been performing your civic duty by properly reporting your income.

(Check your state’s government website to determine exactly how long you’re supposed to keep state tax returns.)

Property records.

Keep all of your records pertaining to…

  • Your ownership of your house
  • The legal documents for buying your house
  • Commissions to your real estate agent
  • Major home improvements

Save these documents for a minimum of 6 years after you move out of your home. If you’re a renter, keep all of your records until you’ve moved out. Then, fire up your shredder and get to work!

Speaking of your shredder…

Annual documents to destroy.

Every year, you can shred paycheck stubs and bank records. Just be sure of two things…

First, make sure that you’re not shredding anything that might belong in your tax records.

Second, be sure that you’ve reviewed your finances with a professional who will know which documents may need preserving.

Once you’ve done that, it’s fine to feed your shredder at your discretion!

Credit card receipts, statements and bills.

Once you’ve checked your monthly statement against your bank records and receipts, you’re free to shred them. You may want to hold on to receipts for large purchases until the item breaks or you get rid of it.

When in doubt, do some research! It’s better than tossing out something important. And schedule an annual review with a licensed and qualified financial professional. They can help you discern which documents you need and which ones can be destroyed.

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¹ “Save or Shred: How Long You Should Keep Financial Documents,” FINRA, Jan 27, 2017, https://www.finra.org/investors/insights/save-or-shred-how-long-you-should-keep-financial-documents

April 20, 2022

Are You Ready?

Are You Ready?

It’s not a question if buying is better than renting. It’s a question of when you’ll be ready to buy.

That’s because rent money is lost to your landlord forever.

A homeowner, though, has the chance for the value of their house to increase. It may not be an earth-shattering return, but there’s a far higher chance that you’ll at least break even from owning than renting.

Even with its advantages, owning a home isn’t for everyone… at least, not yet. Here are a few criteria to consider before becoming a homeowner.

You’re ready to put down roots. If you’re not yet prepared to live in one place for at least five years, home ownership may not be for you.

Why? Because buying and selling a home comes with costs. As a rule of thumb, waiting five years can allow your home to appreciate enough value to offset those expenses.

So before you buy a home, be sure that you’ve done your homework. Will your job require you to change locations in the next five years? Will local schools stay up to par as your family grows? If you’re confident that you’ll stay put for the next five years or more, go ahead and start planning.

You can cover the upfront costs of home ownership. The upfront costs of buying a home, as mentioned above, are no laughing matter. They may prove a barrier to entry if you haven’t been saving up.

The greatest upfront costs you’ll face are the down payment and closing costs. A down payment is usually a percentage of the total purchase price of your home—for instance, a home priced at $200,000 might require a 20% down payment, or $40,000.

Closing costs vary from state to state, with averages ranging from $1,909 in Indianna to $25,800 in the District of Columbia.¹ These include fees to the lender and property transfer taxes.

The takeaway? Start saving to cover the upfront costs of purchasing a home well in advance. Your bank account will thank you!

You can handle the maintenance costs of home ownership. Say what you will about landlords, but at least they don’t charge you for home repairs and maintenance!

That all changes when you become a homeowner. Every little ding, scratch, and flooded basement are your responsibility to cover. It all adds up to over $2,000 per year, though that figure will vary depending on the size and age of your home.² If you haven’t factored in those expenses, your cash flow—as well as your airflow—might be in for trouble!

Do you have residual debt to deal with? The great danger of debt is that it destabilizes your finances. It dries up precious cash flow needed to cover emergency expenses and build wealth.

That’s why throwing a mortgage on top of a high student loan or credit card debt burden can be a blunder. You might be able to cover costs on paper, but you risk stretching your cash flow to take care of any unplanned emergencies.

In conclusion, owning a home is an admirable goal. But it may not be for you and your family yet! Take a long look at your finances and life-stage before making a purchase that could become a source of stress instead of stability.

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¹ “Average Closing Costs in 2020: What Will You Pay?” Amy Fontinelle, The Ascent, Sept 28, 2020, https://www.fool.com/the-ascent/research/average-closing-costs/

² “How Much Should You Budget for Home Maintenance?” American Family Insurance, https://www.amfam.com/resources/articles/at-home/average-home-maintenance-costs

March 7, 2022

Questions to Ask Before Buying a Home

Questions to Ask Before Buying a Home

Buying a home is one of the largest investments many people will ever make.

It’s also among the most complicated and time-consuming transactions. So before you sign on the dotted line, it’s best to ask yourself these key questions:

What are my needs for space?

How much can I afford to spend each month on my mortgage, utilities, and repairs?

Are there pre-existing problems with this property?

How is the neighborhood? Is it safe? Are the schools good? What kind of amenities are nearby (i.e., grocery stores, restaurants, sports)?

How much will I need for closing costs and my down payment?

What’s my strategy for a bidding war?

What are my needs for space? When you’re buying a home, it’s important to take stock of your needs for space. Do you need a lot of bedrooms for a growing family? A large backyard for barbecues and birthday parties? Or would you be happy with a more modest property that will save on monthly mortgage payments?

Planning ahead will help you stay within your budget and find the right property for your needs. Take time to sort through the options and be vigilant to rule out homes that may seem appealing at first glance, but might not truly serve your family.

If you’re unsure about what you need in a home, consult with a real estate agent who can help figure out the amenities that are best suited for you.

How much can I afford to spend each month? It’s important to be realistic about how much you can afford to spend each month on your mortgage. A good rule of thumb is that your mortgage payment should not be more than 30% of your monthly income. And remember—just because you’re pre-approved for a certain amount, that doesn’t mean it’s what you can actually afford to spend.

It’s also a good idea to have a budget for other costs associated with homeownership, such as property taxes, homeowner’s insurance, utilities, maintenance, and repairs. It’s impossible to fully estimate these costs in advance. But by planning ahead, you can get an idea of your potential monthly expenses and weigh them against your income.

Are there pre-existing problems with this property? It’s critical to be aware of any potential problems. This includes checking for any major repairs that may need to be done, as well as researching the surrounding neighborhood. Is this house in a flood plain? How is the foundation? When was the last time the roof was replaced?

It’s a good idea to have a home inspection done before making an offer on a property. This will help you get a better idea of the condition of the property and what repairs need to be made.

If you’re not comfortable with the condition of the property—no matter how beautiful or spacious the house is—it’s best to walk away and find a property that’s a better fit overall.

How is the neighborhood? Is it safe? Are the schools good? What kind of amenities are nearby? When you’re buying a home, it’s important to take into account the surrounding neighborhood. This includes researching crime rates, checking out traffic patterns, inquiring about the schools, and seeing how close you are to stores or activities that are important to you.

If you have children, it’s critical to research the schools in the area. You’ll want to make sure that there is a high-quality education available. You’ll also want to be aware of any negative reviews about the schools in the area.

How much will I need for closing costs and my down payment? There are a number of costs that you’ll need to budget for. This includes the down payment, closing costs, and moving expenses.

The downpayment is the amount of money that you pay upfront when you buy a home. It’s usually between 5% and 20% of the purchase price. So if you’re buying a $400,000 home, you’ll need to pay between $20,000 and $80,000 upfront.

Closing costs are the fees that are charged by the bank and the government when you buy a home. These costs can range from 2% to 5% of the purchase price. So in the example above, you would be paying between $8,000 and $20,000 in closing costs.

Moving expenses can range from $500 to $5,000, depending on how much stuff you have and how far you’re moving.

It’s important to budget for these costs ahead of time so that you’re not surprised when you sign the paperwork and are handed the keys.

What’s my strategy for a bidding war? It’s a problem that’s caught many off guard in the current housing market. That’s why it’s important to have a strategy in place. This includes knowing how much you’re willing to spend and being prepared to make a higher offer than the other buyers.

It’s also important to have your finances in order. This means that you should be pre-approved for a mortgage and have enough money saved up for your down payment.

If you’re not comfortable with the idea of a bidding war, it’s best to walk away and find a property that’s a lower price.

Buying a home is never an easy decision. That’s why these questions should all be considered ahead of time—preferably with your realtor—so they don’t catch you by surprise when buying a house! What other factors can you think of? Let us know what future homeowners might want to consider when purchasing a new home.

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January 25, 2021

How Your House Can Earn You Money

How Your House Can Earn You Money

If you’re a homeowner, your house can do more than just consume cash flow–it can generate it as well!

Here’s how…

Rent out a unit, basement, or room of your house at a price that helps offset the cost of your mortgage. It’s really that simple!

Let’s consider an example that demonstrates why this strategy is so effective.

Suppose you’ve saved enough money to put a down payment on your first home. Good for you! You’ve done the legwork, and discovered that your mortgage payment will be around $1,000 per month. You’ll also need cash for property taxes and homeowners insurance, too. Even though you’re glad you’re in a home of your own, you might start wondering if you’ve bought a money pit that will consume your cash flow for the next 15 to 30 years.

But you’ve also bought a potential source of income, if you think a little outside the box.

See, your house has a finished basement that’s begging to be transformed into a rentable space. All told, you could rent it out to a friend and put those funds toward your mortgage.

By simply utilizing space that you already own, you can unlock a revenue stream that can help offset your mortgage payments!

That extra cash flow can cover daily expenses, pay down the house faster, or help you begin saving and investing.

This strategy, called “house hacking”, may not be for everyone–it favors homeowners with duplexes or finished basements. Plus, it requires the homeowner to become a landlord, a role some may not care for.

If you have the space, consider renting out a slice of your home to someone you trust. It’s a simple way to leverage resources you already have to generate the cash flow you may need!

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¹ “Forget coffee and avocado toast — most people blow nearly 40% of their money in the same place,” Lauren Lyons Cole, Business Insider, Apr 26, 2019, https://www.businessinsider.com/personal-finance/how-to-save-more-money-2017-8#:~:text=Housing%20accounts%20for%20about%2037,further%20limiting%20his%20housing%20expenses.

August 24, 2020

Renting vs. buying a home: Which is right for you?

Renting vs. buying a home: Which is right for you?

100 million Americans live in homes they or their families rent.

Which means about 250 million live in homes that are owned by themselves or their families.[i]

What about you? Are you a renter or an owner? If you’re thinking about making a change, take a look at these important factors when deciding to rent or own.

The Case for Ownership One very oft-cited benefit of owning over renting is building up equity. When one rents, the entire rent payment goes to the landlord, and the tenant does not own any part of the dwelling at all. With a mortgage, on the other hand, the payer receives some percentage of ownership after every payment (assuming the payment is going towards the principal rather than interest alone), eventually leading to full ownership of the property.

For those with enough capital to outright purchase a property, ownership is almost certainly the best decision financially: no money is paid to a landlord for a service that is consumed but non-saleable in the future. Even for those without sufficient capital, mortgages tend to offer low interest rates (compared to other loan products), and the buyer can usually justify the mortgage interest in return for eventual full ownership. Even if the owner decides to move before the mortgage is completely paid off, the equity that was built thus far can be recouped and used later.

Other reasons to own may include more privacy and greater ability to customize the property. There is also the feeling of stability that you won’t have to renew a contract or potentially pay higher rent during the next cycle when your lease renews.

One of the biggest drawbacks of ownership is the potential that the property value may decline, particularly when still under mortgage. If the value of the property goes down – possibly due to a natural disaster or a lot of foreclosures in your neighborhood [ii] – the equity that was built by the owner may decline, not the amount owed on the loan. Thus a substantial decrease in prices as happened in the late 2000s, could cause an owner to be in the same position financially as a renter – that is, with no equity to speak of.

The Case for Rentership For those who cannot meet ownership’s capital requirements, renting is not a choice – it’s a necessity. However, even those who would qualify for a mortgage may be better off renting, especially if they insist on flexibility. Selling a property is an involved, complex financial transaction that may take many months to complete. If you’re renting and you need to move, finding a subletter (if allowed) is a possibility, and even when not, a standard rental agreement usually only lasts one year, after which the renter may decline to renew. Thus flexibility is one of the most important factors for those who wish to rent.

And while there is usually much less customization allowable at rental properties, there may be significant benefits included in rent with utilities paid, maintenance performed, and communal facilities like gyms, pools, or laundry facilities available. For owners, maintenance, utilities, and tax bills are solely the responsibility of the owner, whereas for renters, these may be paid in part or in full by the landlord. Regarding the investment side, renters do not own the property, so they do not have to worry about losing equity if the property market decreases in value.

Some drawbacks of renting may be less privacy, not being able to build equity, and the uncertainty of future rental prices or even availability. Of course, if the rent increases too much, the renter has the flexibility to leave the property at the next cycle.

So whether you’re thinking of renting or buying, before you sign on the dotted line, examine your short and long term goals, the risks you’re willing to take, and your budget.

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August 10, 2020

First time home buyer? Beware hidden expenses.

First time home buyer? Beware hidden expenses.

If you’re getting into the home buying game, chances are you’re feeling a little overwhelmed.

Purchasing a home for the first time is exciting but it can also be very stressful! Anyone who’s been through that process could probably share a story about a surprise hidden expense that came along with their dream home.

Read on to help prepare yourself for some common costs that can pop up unexpectedly when you’re purchasing a home.

Emergency fund
Before we get into the hidden costs of homeownership, let’s talk a little about how to help handle them if and when they do arise. If you’re getting ready to buy a home but don’t have an emergency fund, you may want to strongly consider holding off that purchase, if at all possible, until you do have an emergency fund established. It’s recommended to put aside at least $1,000, but preferably you should save 3-6 months of your expenses, including mortgage payments. An emergency fund is the most fundamental personal finance tool you can have in your toolkit. It’s like the toolbox itself that holds all your other financial tools together. So, before you start home shopping, build your emergency fund.

Homeowners associations
If your dream house happens to be in a neighborhood with a homeowners association (HOA), be prepared to pony up HOA fees each month (some HOA’s may charge these fees every quarter, or even annually). HOA fees may cover costs to maintain neighborhood common areas, such as pools or parks. They may also cover maintenance to your front lawn, and/or snow removal from driveways, etc. Typically, a homeowners association will have a board that enforces any agreed-upon property standards, such as having you remove ivy from your home exterior, or making sure your sidewalk is pressure washed regularly.

If you purchase a home with an HOA, be prepared for the added cost in fees as well as adhering to the rules. You may incur a fine for such things as your grass not being mowed properly, or parking your boat or camper in your yard.

Private Mortgage Insurance (PMI)
PMI comes into play if you can’t make at least a 20% down payment on your new home. If that’s the case, your mortgage lender charges PMI which would kick in to protect them if you default on the loan. It can cost 0.3 to 1.5% of your mortgage. However, once you have 20% equity in the home, you don’t have to pay it anymore. (Note: You may have to proactively call your mortgage company and tell them to remove it.)

Maintenance costs
If you’ve been living the maintenance-free life in an apartment or rental home, the cost of maintaining a house that you own may come as a shock. Even new homes require maintenance – lawn care, pressure washing, clearing rain gutters, painting, etc. There’s always going to be something to upgrade or repair on a home, and many first-time home buyers aren’t prepared for the expense.

A good rule of thumb is to budget about 10 percent of the value of your home for maintenance per year. So, if you buy a $250,000 home, you should prepare for $2,500 a year in maintenance costs.

Home insurance
Be prepared for some sticker shock when purchasing your homeowners’ insurance. Homeowners insurance is typically significantly more expensive than purchasing a renter’s policy. If you live in an area prone to natural disasters, be prepared to pay top rates for homeowners’ insurance. If you live near a body of water, you may also need flood insurance.

Life insurance
Many first-time homebuyers may not give life insurance a thought, but it’s an important factor that can help protect your investment. You probably need life insurance if anyone is depending on your income. Especially if your income helps pay your mortgage every month, you should strongly consider a life insurance policy in case something were to happen to you. This will help ensure that your spouse or significant other can continue to live in your home.

Homebuying is exciting and part of the American dream. But don’t neglect to come back to reality – at least when making financial decisions – so you can budget properly and anticipate any hidden costs. This will help ensure that your first-time home buying experience is a happy one.

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November 6, 2019

Common Financial Potholes

Common Financial Potholes

The journey to financial independence can feel a bit like driving around with your entire retirement fund stashed in the open-air bed of a pickup truck.

Every dollar bill is at the mercy of the elements. Think of an unforeseen medical emergency as a pop-up windstorm that whips a few thousand dollars out of the truck bed. And that time your refrigerator gave out on you? That’s swerving to avoid a landslide as it tumbles down the mountain. There goes another $1,000.

Emergencies like a case of appendicitis or suddenly needing a place to store your groceries usually arrive unannounced and can’t always be avoided. But there are a few scenarios you can bypass, especially when you know they’re coming.

These scenarios are the potholes on the road to financial independence. When you’re driving along and see a particularly nasty pothole through your windshield, it just makes sense to avoid it.

Here are some common potholes to avoid on your financial journey.

Excessive or Frivolous Spending
A job loss or a sudden, large expense can change your cash flow quickly, making you wish you still had some of the money you spent on… well, what did you spend it on, anyway? That’s exactly the trouble. We often spend on small indulgences without calculating how much those indulgences cost when they’re added up. Unless it’s an emergency, big expenses can be easier to control. It’s the small expenses that can cost the most.

Recurring Payments
Somewhere along the line, businesses started charging monthly subscriptions or membership fees for their products or service. These can be useful. You might not want to shell out $2,000 all at once for home gym equipment, but spending $40/month at your local gym fits in your budget. However, unused subscriptions and memberships create their own credit potholes. If money is tight or you’re prioritizing your spending, take a look at your subscriptions and memberships. Cancel the ones that you’re not using or enjoying.

New Cars
Most people love the smell of a new car, particularly if it’s a car they own. Ownership is strange in regard to cars, however. In most cases, the bank holds the title until the car is paid off. In the interim, the car has depreciated by 25% in the first year and by nearly 50% after 3 years.

What often happens is that we trade the car after a few years in exchange for something that has that new car smell – and we’ve never seen the title for the first car. We never owned it outright. In this chain of transactions, each car has taxes and registration fees, interest is paid on a depreciating asset, and car dealers are making money on both sides of the trade when we bring in our old car to exchange for a new one.

Unless you have a business reason to have the latest model, it’s less expensive to stop trading cars. Think of your no-longer-new car as a great deal on a used car – and once it’s paid off, there’s more money to put each month towards your retirement.

To sum up, you may already have the best shocks on your financial vehicle (i.e., a well-tailored financial strategy), but slamming into unnecessary potholes could damage what you’ve already built. Don’t damage your potential to go further for longer – avoid those common financial potholes.

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