{"id":190486,"date":"2019-03-14T13:15:07","date_gmt":"2019-03-14T17:15:07","guid":{"rendered":"https:\/\/www.livabl.com\/articles\/?p=190486"},"modified":"2019-03-14T13:15:07","modified_gmt":"2019-03-14T17:15:07","slug":"save-downpayment-without-ruining-your-life","status":"publish","type":"post","link":"https:\/\/www.livabl.com\/articles\/archives\/save-downpayment-without-ruining-your-life","title":{"rendered":"How to save for a downpayment without ruining your life"},"content":{"rendered":"

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I\u2019m currently saving for a downpayment on a cottage in Ontario. Since I met with a financial planner two weeks ago to make a savings plan, I\u2019ve been tempted to cut out every \u201cunnecessary\u201d purchase \u2014 all at once. Sure, I\u2019m saving money, but at a cost \u2014 I\u2019m starting to hate my life a bit.<\/p>\n

How can I make a dent on my savings without falling into a frugality mindset and cutting everything fun out? For advice, I turned to Shannon Lee Simmons, the founder of The New School of Finance<\/a> \u2014 a fee-only financial planning and coaching firm in Toronto and the author of the best-selling books Worry-Free Money: The guilt-free approach to managing your money and your life<\/em> and Living Debt Free: The no-shame, no-blame guide to getting rid of your debt.<\/em><\/p>\n\n

Buying a cottage is the inspiration behind The Ladder \u2014 Livabl\u2019s brand new newsletter all about the climb on and up the property ladder. I\u2019ll be sharing more about where I\u2019ve decided to save versus splurge in the next newsletter dropping March 20th (sign up here<\/a>!). Until then, keep these tips in mind to create a sustainable savings plan that makes you \u2014 in Shannon\u2019s words \u2014 feel like a human.<\/p>\n

\"\"<\/a>Photo: Shannon Lee Simmons\u00a0<\/em><\/p>\n

Continue spending money on things that deliver a high Emotional Return on Investment (EROI).<\/h2>\n

Study your statements, and take a critical look at where you\u2019re shelling out your cash.<\/p>\n

\u201cA lot of times, money is going out the door that isn\u2019t providing any actual value,\u201d explains Shannon. \u201cWe live in an age of microtransactions and subscriptions. People might discount those costs \u2014 \u201cit\u2019s only ten bucks,\u201d \u2014 but if a couple of those things are happening, you can painlessly cut them and raise an extra $50 a month.\u201d<\/p>\n

Do you really need a subscription to Netflix, Hulu and HBO? Did you sign up for a fitness app on New Year\u2019s Day and have yet to use it? These things offer a low EROI and should be axed immediately. But what if you\u2019ve been using that workout app every day and you\u2019re now in the best shape of your life? Way to go! The EROI is high, so keep it around.<\/p>\n

\"See\r\n SEE ALSO:<\/span>5 essential finance tips that every first-time homebuyer should know<\/a><\/strong>\r\n <\/div>\n

\u201cMost of the time, when people want to save, they will punish themselves, I won\u2019t do this, I won\u2019t buy clothes for a year, I\u2019ll make my lunch every day, I\u2019ll walk everywhere,\u201d explains Shannon. \u201cAll of these things may not be practical or realistic for daily life. So they set you up to inevitably fail.\u201d This creates a vicious cycle where you punish yourself even harder the next time you try to get back on the wagon. Instead, get realistic about your spending and cut where you can \u2014 without depriving yourself.<\/p>\n

\"\"<\/a>Photo: James Bombales\u00a0<\/em><\/p>\n

Scrap overly complicated budgets and work within a hard spending limit.<\/h2>\n

Most financial experts will advise you to create a budget and track your spending by breaking your life down into 50 subcategories \u2014 coffee, clothes, utilities, phone bill, shopping, etc. What could go wrong? Well, like a strict diet, overly complicated budgets often fail.<\/p>\n

\u201cIt makes spending money on anything feel scary because if you have $100 for groceries and you end up spending $110, your spreadsheet doesn\u2019t line up, your app goes off, and you instantly feel like you\u2019ve failed,\u201d explains Shannon. \u201cAnd then you have to borrow from another category and then you might feel like you failed there, too. It doesn\u2019t mean you overspent overall, it just means you overspent in this micro-category.\u201d<\/p>\n

Instead, Shannon suggests creating a hard limit with only four simple categories: fixed expenses, meaningful savings (like how much I\u2019d like to put aside for the cottage each month), short-term savings and spending money. Isolate the spending money and that becomes your new budget for the fun stuff.<\/p>\n

\u201cLet\u2019s say your hard limit is $800 a month. As long as you\u2019re fed and having fun, who cares if you\u2019re spending your money on a taxi, coffee, restaurants or clothes? You\u2019re not overspending so you don\u2019t have to budget. You just have to know the hard limit and spend within it.\u201d<\/p>\n

\"\"<\/a>Photo: ivory.and.oak\/Instagram\u00a0<\/a><\/em><\/p>\n

Next time you\u2019re comparing yourself to others, remember that every picture has a price tag.<\/h2>\n

Scrolling through my feed, I notice an interior designer I follow on Instagram proudly holding keys in front of an adorable A-Frame cottage. The envy creeps in.<\/p>\n

\u201cThe comparison game is impossible to escape forever because it\u2019s human nature. Saying stop comparing yourself is like saying stop breathing. Accept that it\u2019s going to happen. But know that it\u2019s up to you to decide how long you\u2019re going to let that feeling of inadequacy linger and how much you believe it,\u201d explains Shannon.<\/p>\n

The first step toward keeping yourself from resenting your own financial situation is to recognize envy when it\u2019s happening. \u201cCalling it out is half the battle,\u201d says Shannon. \u201cRecognize that social media is putting this on steroids. We have so much access to people’s lives now, and we don\u2019t know half the story. You have no idea if those people are swamped in debt, or if they got a massive handout from their family.\u201d<\/p>\n

As a financial planner, Shannon has seen this time and time again. Something that might look wonderful on Instagram could tell a very different story when you pull the curtain back. \u201cEvery picture comes with price tag,\u201d she explains.<\/p>\n

\"\"<\/a>Photo: Marco Verch\u00a0<\/a><\/em><\/p>\n

Is renting is the best option for now?<\/h2>\n

Saving for a downpayment is a long-term game but it can be hard to resist the desire to want it, and want it now. If you\u2019ve put zero dollars aside for fun stuff in order to race to the finish line, consider stretching your timeline in a rental.<\/p>\n

\u201cThere\u2019s a fear that if we wait three years the market is going to be much higher and you won\u2019t be able to save fast enough to keep up,\u201d explains Shannon. \u201cMy advice is that nobody is psychic and we don\u2019t know anything for sure. It\u2019s worse to put yourself in over hot water, even if the market spirals out and blocks you for another few years. The misery and the debt you might take on by putting yourself in a house you can\u2019t afford is awful.\u201d<\/p>\n

It can be frustrating to cough up the rent each month for something that doesn\u2019t belong to you. But it may be the most practical option for now. \u201cIf you have your rent under control, you can bank a lot of money and take advantage of the fact that you don\u2019t have to run to Home Depot every weekend dealing with unforeseen housing repairs.\u201d<\/p>\n

Take that extra cash and squirrel it away for a home when you\u2019re ready.<\/p>\n