Three Costs to Keep Under Control

Vanguard has some thoughts/suggestions on how to keep your expenses under control. They focus on three areas -- investment costs, controlling overall spending, and learning to say "no". I'll cover all three along with FMF posts that provide additional information. Let's start with a summary of the impact investment costs can have on your overall return:

Obviously, none of us has the power to determine the direction of the markets. Even the savviest, most experienced investors can't predict what will happen on Wall Street from one day to the next. But you can control how much you pay to invest—and you may be surprised at how much investment costs can affect performance over the long run.

If a fund with a 1.0% expense ratio goes up 8% over the course of a year, you actually end up earning 7%. And if the fund loses money—an all-too-common occurrence recently—its expenses drag your net return even deeper into the red.

If you want more information on how costs impact your investment returns, check out Costs Matter If You Want to Maximize Investment Returns and How I Easily Improved My Investment Returns Using Vanguard Admiral Shares.

Next, they cover a topic near and dear to my heart:

Of course, if you're looking to put your financial house in order, keeping an eye on investment costs is just part of the solution. For many people, living within their means—spending less than they earn and saving diligently for the future—is a larger and more fundamental challenge.

"Many people simply aren't accustomed to living within a budget," said Mr. Ameriks. "But if you're looking to trim your expenses and find more to save, creating a detailed budget is a good way to start. Remember that saving simply means not spending."

Spending less than you earn is my best piece of financial advice. Certainly having a good budget is the first (or at least a key) step in keeping expenses lower than income.

Finally, here are their thoughts on saying "no":

The hardest part about saving money may be saying "no" when the urge to spend strikes. Getting your spending under control may mean more than just passing up the $4 cappuccino now and then. You may need to develop—and sustain—more financial self-discipline than you've ever known.

One word: discipline.

Comments

[poor boomer]

I've been saying no for so long out of necessity I don't have any desires left.