Large incomes do not solve money problems. As you make more, you spend more. The same budgeting challenges exist, but with bigger numbers. This was one of the points raised in a column I wrote recently about a financial adviser who warns that high earning baby boomers aren’t saving enough for retirement.
Now for an illustration of where the money goes in a household with a big income. It’s an article called Scraping By On $500,000 A Year, and it shows how easy it is to soak up a big income with fancy cars and multiple vacations every year. This is a U.S. example, but it serves quite well to demonstrate how people with huge incomes spend.
Do high earners need a financial literacy lesson? Here’s a start: Pare back your spending to consume fewer luxuries. One vacation instead of three. One luxury car instead of two. If you need help, people who don’t earn big bucks can advise you on living with less.
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Is it OK to skip a mortgage payment?
I say no, but lenders do allow you to do this. Here’s a summary of how skipping a payment increases your overall mortgage borrowing costs.
Start your spring decluttering right here
This video presents five things you really need to throw out.
Making your splurge on steak worthwhile
Seven tips for cooking steak, which seems more expensive at every trip to the grocery store.
How’s your French?
A list of the most and least expensive cities to rent an apartment. Quebec and New Brunswick cities dominate.
The challenge of parenting an adult
Large numbers of young adults live at home because they work temporary jobs or can’t afford high rents and house prices. But what if your adult kids are difficult to live with?
Today’s featured financial tool
Here’s a useful checklist of tax credits and deductions for 2016. Make sure you’re using every tax break possible.
Ask Rob The question: “I read everywhere that a prudent investing strategy is to buy an index rather than hiring someone to actively invest your money. Is this a good strategy no matter what the size of the money that is being invested? I am thinking of something in the $2-million range.”
My reply: “Index investing can make sense for portfolios of any size. But I get the sense you’re one of the many investors who sees indexing as a DIY strategy. Not necessarily. There are advisers who actively manage money, and those who use low-cost exchange-traded funds to track indexes. With a sizeable portfolio, you may have complex financial planning needs. Whether you go with indexing or active management, make sure you get good advice to guide your investing.”
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length.
What I’ve been writing about
- Water damage is probably the biggest threat to your home. Are you protected?
-Just bought a house? Pass on TFSAs and RRSPs to pay down your mortgage
- Feeling pressure to buy investments? Try this. (Globe subscribers only)
How to handle three difficult money conversations – negotiating your salary, loaning money to children and couples combining their finances. The videos are from the Financial Planning Standards Council, which oversees the Certified Financial Planner (CFP) designation.
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