Less is not more.

If you are buying or renting, you maybe losing out in the long-term by saving a little bit upfront.

Suppose you found an awesome deal on a house or an apartment. It fits your budget, it’s not amazing but you are a believer in delayed gratification, it’s location is not great but you drive and it needs some TLC but you know how to paint – you are an optimist.

Ask yourself this simple question, How much closer can I get to my ideal living standard if I increase my budget by 10 or 15 percent?

You might think that this is a counterintuitive strategy. Perhaps, you might argue, that the correct strategy is to decrease your budget similarly. I disagree.

My belief is that, whatever your budget is, increase it by at least 10 to 15 percent.

Here is the logic behind this simple strategy;

  • Increasing your budget by 10 to 15 percent will put you in a house or an apartment that is better located to daily necessities, such as shopping centres, transit, schools, hospitals, gyms, clubs, parks, attractions and more.
  • Your house or apartment will generally be in a better cosmetic condition and contain more modern appliances and technology. For example an energy efficient furnace or an instant water heater.
  • Your physical living space will increase and be better laid out.
  • Knowing that you are in a safe, comfortable and modern living space will lead to greater enjoyment of your house or condo and the surrounding amenities.

Let’s look at the numbers. Suppose you are looking to rent an apartment and the maximum you are willing to spend is $2000 per month or perhaps you are buying a house with an asking price of $600,000.

OriginalAdditional Cost
Apartment$2000 / month$2400 / yr
House$600,000$60,000 (~$300/month)

Do you see significant benefit by increasing your budget? If yes, then it will be a good decision.

Of course there are risks to this strategy too.

  • You could be tempted to increase your budget again. Which could land you with unreasonably high rent or mortgage payment.
  • Perhaps the benefits are not too significant to warrant an increase. In this case you might actually ask yourself the inverse question, does my living standard change too significantly if I decrease my budget by 10 percent?

Too often we discount the important things in life. Things that we use and are supposed to enjoy everyday. Don’t compromise when it comes to your living standard.

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