A good friend of mine came to me the other day to tell me about an offer she received from the property management company at her apartment complex and wanted to get my opinion on it.  Due to the poor economy the property management was having difficulty renting some of the larger units.  Since she happened to be in one of the smaller units down the hall from one of the empty larger ones they offered it to her at just $100 more than what she was currently paying.

She continued to tell me what a great deal it seemed like.  She would get a ton of extra space and since her current place was a studio she could finally have a separate bedroom.  In addition she could easily afford it since she was already putting much more than $100 into savings every month.

After listening to her tell me what a great deal it was I reminded her of some goals she had told me about and asked how it would impact those.  Among other things she had been planning on buying her own place in the next few years.  We found that the $100 extra quickly doubled to $200 after taking into account increased expenses for the larger place.  At a cost of $2,400 a year it was clear that she would have to post pone the realization of her goals a few years.

I’m glad to say she decided to not take up the offer.  The place she is in is already a very nice place and there was no real need for the larger apartment.  Especially when weighed against having to wait a few extra years to get her own house.

Many people have problems getting ahead financially because of this common mistake.  They are constantly improving the quality of life before improving the quality of their investments.  Anytime these people get a raise or a little extra money they put it directly into improving their quality of life.  Whether it is buying slight more expensive clothing, or eating out more or moving to slightly more expensive housing. The worst thing about these small improvements in their quality of life is that they tend to go mostly unnoticed and unappreciated.

This is all done at the expensive of their financial futures.  They could cut years off of achieving their financial goals if they could make due with their current situation for a longer period of time.

-T!

The second opinion:

Once I read about a survey that asked the following question: “Would you agree to postpone the results of your activity if you knew that doing so would improve the results?” The survey found that people who agreed to postpone results were also much better off financially than the people who wouldn’t agree to postpone results. In my opinion, the ability to wait for long-term results is one the keys to becoming wealthy.

-O.