Tag Archives: costs

Unavoidable Trifecta of Investment Costs (UTIC)

unavoidable-trifecta-investment-costs

There are costs that can be eliminated, like the constant buying of disposable razors, and costs that can merely be reduced. When it comes to investing your savings, there are 3 costs that are unavoidable: taxes, inflation, and fees.

These 3 costs are especially repugnant because they add up to a lot. Bill Gates, still one the worlds richest people, claimed in 2013 that he had paid over $6 billion in taxes. You lose about 2 cents for every dollar you have in a regular bank account every year to inflation. And fees are baked in to nearly every financial service you can think of.

Though you can never be free of any of these costs, you can certainly reduce how much you end up paying. You could get a financial adviser or an accountant. Indeed, legally avoiding taxes is a giant industry. But the more help you get, the more fees you incur. Generally, fees are lower than taxes, but not always.

If advisers and accountants aren’t for you, or if you at least want to better understand all this stuff, there is, of course, this blog ūüôā

In a nut shell, to minimize tax payments, put your savings in a Tax Free Savings Account (TFSA), where it can grow tax free. If you’ve maximized your annual TFSA contribution, there’s always Registered Retirement Saving Plans (RRSP).

The best way to avoid fees is to learn about how your money works on your own. The more comfortable you are with saving and investing, the less need you will have for more expensive services, like advisers or accountants.

Unlike the other two prongs of this trifecta, inflation is truly unavoidable. The only thing you can do is make sure your money is growing faster than inflation, which isn’t always the case with high interest savings accounts.

 

Avoidable Costs – Disposable Razors

razors

I have mentioned the UTIC (Unavoidable Trifecta of Investment Costs) before. These are things that erode your savings, and the only thing you can do about it is make sure your savings grow at least as much as the unavoidable costs of taxes, fees and inflation.

But there is another way to increase your savings, that is to reduce your cost of living: the money you have to spend for living comfortably in Canada. This includes housing, clothing, food, cell phones, parking, transit, Netflix, etc. Some of these are unavoidable, everyone needs shelter, food, and clothing. But there are ways to reduce most costs, and today, I’m going to write about a personal favorite cost-saving decision: shaving with anything other than disposable razor cartridges.

There are definite environmental advantages to avoiding disposable razor cartridges, but this is a finance blog, so let’s look at the numbers. I’m¬†certainly not the first blogger to look at the cost of shaving, sharpologist.com has a fun¬†write-up about the costs of various shaving options.¬†¬†According to sharpologist, straight-edge razors are¬†the least expensive, by far.

I can vouch for that. I personally shave with a straight-edge. I spent $70 on the initial blade, $40 on a strop, $35 on a brush, and $50 on a sharpening stone. About $200. That was almost 10 years ago. That’s really all the money I’ve spent on shaving in the last 10 years, about $20 per year.

According to Gillette, I could get 5 weeks of shaving out one disposable razor cartridge. According to walmart.ca, 12 cartridges cost about $52. That means,¬†I could¬†get just over a year’s worth of shaving for about $50. Over 10 years, that works out to $500, $300 more than what I’ve actually spent. Consider the next 10 years, my real straight-edge cost remains at $200 while the cost of using Gillette’s disposable cartridges will rise to about $1000.

Over my lifetime, I can expect to save $2000-$2500 from using a straight-edge.

Given the more intimidating learning process, straight-edges are not for everyone. But that’s ok, there are still better options than disposable cartridges. Classic safety razors are also inexpensive, as are their replacement blades.