ASK KEVIN O’LEARY: My girlfriend has an expensive and irresponsible addiction… should I dump her?

Dear Kevin,

I have always been incredibly money-conscious. At a young age, I got a minimum-wage job to afford school tuition and my own car. Now, I have a well-paid job and make much more than I did as a student.

Because of my extreme frugality, I have enough money in my savings to cover multiple months of rent in an emergency and an impressive investment portfolio (if I do say so myself).

The financial part of my life is working.

The personal part – not so much.

My girlfriend is frustrated that I would rather stay in every weekend than cough up cash for overpriced cocktails or a fancy dinner.

I’m always looking for ‘free’ activities rather than ones that cost money and I only shop the sale rack for my clothes. My biggest splurge is occasional takeout when I don’t feel like cooking dinner.

I understand how she feels and I, too, am starting to get cabin fever from always staying in. 

I’m just afraid of destroying my financial progress and my dream of owning a home if I start spending money on the finer things in life.

How do I balance my desire to be financially responsible with my social life?

Sincerely,

Penny Pincher

Well, Penny Pincher, I live by a hard and fast rule: only splurge 5 percent of your income on ‘fun.’ It would be unwise to spend more than that on lavish dinners or pricey vacations.

However, I don’t think the problem you’re facing has anything to do with your aptitude for savings.

You need to find a partner who understands your financial philosophy if you’re going to live together or get married. It sounds like this woman does not share the same views on money and, in that case, you should dump her and find someone new.

But let’s break down how you should be spending.

For starters, rent – or your mortgage – should not be more than one-third of your after-tax income. If your monthly payments are more than that, it will put a strain on your lifestyle.

Canadian investor, entrepreneur and ‘Shark Tank’ star Kevin O’Leary gives readers stellar  advice for all their financial troubles.

Then, another 5 percent of your take-home can be put towards ‘fun,’ like vacation twice per year, and you’ll have to find a way to allocate 15 percent of your income for savings to put into an index fund. This will help your long-term sustainability as an investor and ensure you can retire.

Say you hypothetically bring in $100 per month in income. That’s $30 towards rent, $5 for your ‘fun’ fund and $15 for savings, which should be a mixed investment portfolio.

Now, if you really must spend a little more for the sake of your girlfriend, there are surely some hidden, unnecessary fees that can be trimmed from your monthly budget, starting with subscriptions.

Subscription agreements tend to be a money-suck. Customers sign up for a service with a recurring monthly or annual fee only to forget about it. Still, it continues to drain your wallet without you knowing, especially with yearly price hikes.

Here’s my advice: go through your bank statements and determine which subscriptions you don’t use. Generally, about one-third are useless and you should get rid of them. If you don’t, you’re just hemorrhaging cash every month.

Next, you must negotiate your cable bills.

You may think the upfront cost is set in stone, but let me be the first to tell you – it’s not.

People should always call the retention officer, that is the person who is responsible for keeping you as a customer and they are often willing to negotiate fees temporarily.

Typically, they’ll give a retention bonus – such as a free month of service – and they do it all the time. However, be prepared to switch to another provider on the chance they refuse.

Lastly, don’t let anyone shame you for bargain shopping, but that being said, don’t be afraid to splash out on expensive items if they are worth the money.

There should be some association between the dollars spent and the quality of products. Sometimes, it’s better to spend $200 more for a quality watch, for instance, rather than buying an off-brand dupe. But you cannot frivolously buy things just because you want them – if they aren’t worth the price tag, you’ll never get your capital back.

Dear Kevin,

I have a serious case of FOMO – and it’s bankrupting me.

I spend every weekend – and many weeknights – out with my friends spending obscene amounts of cash just to keep up with their lifestyle. From caviar bumps at dinner to splurging on multiple rounds of $20 cocktails, my fear of missing out is draining my bank account.

I’m sure I have ‘money dysmorphia.’ When I’m in a social setting, I act like I have more money in the bank than I really do.

But as a young adult living large in a big city, my philosophy has always been ‘you only live once’ – after all, you can’t take cash with you to the grave.

I’m convinced, in this economy, I’ll never own a home anyway, so why not spend my money now?

Sincerely,

Serious Spender

Serious Spender, are you dating Penny Pincher? If so, I may have some bad news for you.

But seriously, if you continue to blow your cash, you will be in trouble.

This path of overspending only has one outcome: severe credit card debt. You should not be doing caviar bumps if it’s putting you in the red!

This kind of money dysmorphia is almost like an addiction. You need an intervention.

While I don’t know how much of a budget deficit you might be in, I can offer you a way to sort it out. All it takes is a very simple test, and you don’t even need a computer or your phone.

Write down your income over a 90-day period – whether it’s your side hustle or routine paychecks – and compare it to 90 days of spending (including the caviar bumps!).

If your charges are outpacing your take-home, that difference will be the end of you.

First, you must get yourself to a place where you break even, at least in the ‘recovery’ stage of this addiction therapy.

It’s going to hurt at first – that aforementioned ‘FOMO’ might creep in – but this is the only way to take control.

Once you finally break even, then shift into a new mode – one where you start to pay off your credit card.

To do this, you must slash spending by another 15 percent. That cash will then be used to pay down your debt. While this may seem impossible at first, I assure that – if you abide by the rules prescribed above – it’s entirely possible.

Keep focused on your goal – no credit card debt in as little as a year and a half. And that’s not the end of your financial journey.

After you become debt-free, start saving for a home. Put away a total of 20 percent of your take-home income and bank it in a savings account (not an investment account!)

This is your down payment on a house. The next step is purchasing the home and paying a mortgage, which should be no more than one-third of your income.

Now ask yourself. In 5 or 10 years, what will you value more: a lump of fish eggs slurped off your hand… or home?