The cost of Comfort+ living

I was running along the beach the other day, minding my own business when I was distracted by the "for sale" signs along the road. The houses on offer where huge and mostly ugly but they did have a fantastic view of Table Bay and the mountain.

My mind was taken to the current economic uncertainties in the world and the words I read that morning in a research article that stated "Don't focus on the things you can't change. Rather focus on the things you can".

Now, I have always been fussy about where I lived, but never about what I drove. During my early years as a Financial Planner at Citadel, I noticed that most people spent a huge amount of money on their cars and I came to realise how fortunate I was to not have such a weakness, because it was pretty difficult to accommodate their passion and still get them to retire before they turned 80! 

I understand that everybody has something they splurge on, unfortunately cars and houses are two of the biggest ticket items. So, if you can be disciplined enough NOT to spend that extra couple of thousand on the top of the range product and adhere to the "focus on something you can change" principle, it will help a tremendous amount.

I call this the "Comfort +" effect.

Let's take an example. Your child finishes school and studies something for 4 years. The child is now 22 and starts working. The child earns enough to rent a small shared flat and to finance a small car. At age 30 the child saved enough money to buy a car without financial assistance and here the child is faced with the first choice. Buy a new car for R80 000 or a second hand one for R60 000? The child chooses the R60 000 option, thus saving R20 000. Time goes by and at age 35 the child faces the same choice. The child also has a choice to buy a flat for R1mil or one for R800 000. Once again the child chooses wisely and saves R20 000 on the car and R200 000 on the house.

The option of new or used car repeats itself every 5 years and at age 60 the child contemplates retirement at age 65. What was the financial impact of the wise choices made during the last 40 years? The answer is R3 000 000 if the cumulative saving of R340 000 grew at 8.5%. If we take inflation at 6%, the real saving was R580 000. This is R580 000 saved because the Comfort + effect was eliminated.

At this stage of my jog I am tired and sweating and the cool sea breeze isn't as comforting as before. I flop down onto a sofa and take a long drink from my water bottle, both of which would have been equally as nice in one of those big, ugly houses for sale on the beach, but not more so!

What I am trying to say is, spend money on what makes you happy in life, but remember that the bigger, faster, brighter, sweeter, smarter, louder product will not necessarily make your life more comfortable, but will definitely cost you more than it offers!