We all fantasize about what we’d do with more money, from going on a trip, buying that cool car, a bigger home, TV and so on. But the simple truth is we could all easily build our savings by $300 or more a month by getting a handle on our expenses and figuring out where the money goes, developing a budget and controlling our impulse spending.
As the interest rates charged on credit card balances can be up to 20 per cent, just consolidating this debt onto something with lower interest such as a personal line of credit could save $50 or more a month. Consider if you regularly carry a $5,000 balance on your credit card, you will pay about $1,000 a year in interest. Just by transferring this balance to a line of credit charging prime plus 1.5 per cent (the rate that those with good credit would qualify for) the interest saving works out to roughly $625 a year, or about $50 a month. Then use the savings to pay down the card balance faster and once paid off, to build some rainy day savings.
Work towards having what we call ‘good debt”. Good debt is tax deductible, any that you take on to invest to make money. Many people borrow to invest in RRSPs but don’t realize that the interest is not deductible. Why not consider setting up an at-source registered payroll savings plan at work, as the money is invested directly into your RRSP, bypassing CRA all together. Once you are “bad debt” free, stash the money saved into a high interest savings plan, ideally a Tax Free Savings Account for the first $5,000 each year.
We recommend you track your expenses for a few months to understand how much you spend and what you spend it on, as you can then determine where you can comfortably cut back. If you are used to spending $300 a month on clothes and you decide to cut this in half, it’s an instant $150 a month savings. Once you have a budget in place, consider putting cash aside for each needed expense, then when shopping, bring only the allotted amount of money with you. Leave the credit cards at home, as they make it too easy to buy on impulse and overspend.
When dining out or at hockey or football games, avoid ordering alcoholic beverages as all these places have huge mark-ups on drinks. If you can get away with water and have wine and beer at home after, you could easily save $50 or more. Considering that the average Canadian family spends a minimum of $100 on groceries a week, much of this on expensive convenience food. Here are some simple tips to finding quick savings on your grocery bill. Check out all the flyers and coupons, watch for in-store discount days such as Dollar Daze for even more savings. Check out the no-name brands as they are usually 20 to 30 per cent less than name brand products and lastly, buy less pre-prepared food as fresh is cheaper and healthier.
Simply unplugging your landline phone for those of you whose family members own cell phones could save you at least $40 a month. Then keep your mobile bills low by shopping around for the most affordable packages, and only get the additional features you need rather than going with all the frills that you may never use.
Reducing the energy consumption at home and at your business can lead to big savings. For example, consider switching to fluorescent light blubs, which use about 75 percent less energy. Turn down the heat when you’re not home. Lowering the thermostat by 10 degrees can save 10 percent off your gas bill, for about a $200 savings (or $17 a month). Better still, install a programmable thermostat and it’s done automatically for you.
Most Canadians faithfully pay their bills as they come due every month, often by auto debit from their bank account, and any shortfall toward the end of the month gets covered with their line of credit or credit cards. The secret to building savings is to pay yourself first with monthly contributions to your RRSP, TFSA or savings account automatically debited from your bank account. Having these payments deducted automatically every month means we mentally discount having that money available, just like all those deductions from our salary.
Sticking to a savings plan isn’t always easy. To stay on track, keep focused on your goals and follow a budget. Budgeting can be easier by investing in personal finance software such as Microsoft Money or Quicken. Both are user friendly and you can conveniently download statements and transactions from banks and credit card companies. Income & expenses can all be tracked by category and the reports can be custom designed to suit your needs.
Before you know it, you’ll be travelling the globe or enjoying a shopping spree on Fifth
Avenue!