In theory, saving is really easy to do and easy to succeed in, but why do so many people struggle? In order to be a successful saver you have to set obtainable goals, while gaining discipline and restraint. There is no time like the present to start! We will discuss a few easy ways to cut back on your spending and help you reach your financial goals such as: avoid the impulse purchases, make your own lunches and coffee, save your coins, hide your cards, pay your bills on time, use cash, and change your social behaviour.
We are not here to say “save all your money and don’t have fun”. We agree you have to treat yourself every once in a while, hey that’s partially why we work isn’t it? You just have to find the right balance between staying on top of your bills, saving money, and going out and having fun. Life can’t always be about living beyond your means and having fun. At some point you have to look at your finances, think about your future, what type of lifestyle you want to live, and work towards that. Big expenses can occur when you least expect it, so why not prepare?
For all you shopaholics, if you see an item you want, stop and think before you buy! Especially if it’s a large purchase, maybe go home and think about it for a few days or even weeks. After waiting and deciding that it’s something you must have (and you can afford it) go ahead and treat yourself. You might find that you have already forgotten about it or that it wasn’t worth the money. (You’ll be surprised how fast you might forget about an item you wanted to purchase if you wait before buying it). There are items out there that you need such as: food, shelter, and clothing. This rule may apply to some extent. This rule would apply when your closet is full but you see an item that you think would look good on you, and at the moment becomes a must have.
When trying to save money, hide your plastic!!!! Credit cards can be an extremely dangerous item in an undisciplined spender’s hand. A trick to spending less, is to set a weekly amount of money you can spend and have it in cash. You may be shocked to see how fast you go through $100/weekly on yourself for fun, gas, and social outings. Visually seeing your money deplete is much more effective than trying to save while still using cards. This helps you actually see your money disappear instead of being shocked the moment your credit card statement comes in (it’s always the small purchases that add up and get you). When the bills come in, make sure to pay off your credit card in full! Making the minimum payment just won’t cut it. When paying the minimum, you may not even be paying the interest, let alone your actual purchases. If you have a big bill that will take you a long time to pay off and you have no money, go to the bank and open a line of credit (LOC) for at least half the amount (banks will be against you taking the full amount due to the fact they will be losing money on the interest rates) and pay off what you can. Although you will still be in debt, 5% interest rates that you get with LOC are a lot better than 18% interest rates with a credit card.
Credit cards can serve a useful purpose and as soon as you are eligible to get one, you should. Credit cards are a great way to start your credit history, which will be helpful as you get older in making big ticket purchases like a car or a house. You just have to be careful and realize it is not free money. If not used responsibly, it can become very expensive and harmful to you. When it comes to raising your credit card limit it all depends on you. If you are the type to keep maxing out your credit card and can’t pay it off, keep a low limit since raising it will hurt you! If you are responsible with your credit cards and with spending, I would recommend increasing your limit when you can. The reasoning behind this is that if you have a higher limit and keep a lower bill, it will show the bank that you can be trusted with a larger loan, therefore increasing your credit score and potentially receiving lower interest rates on loans. To check your credit score, we recommend you use http://www.consumer.equifax.ca/home/en_ca. It is worth the $23.95 and should be done roughly every three years. Or if you have the patience, you can send it in by mail and receive a credit report for free, your credit score is only $11.95, and you will receive it in 5-10 days. It is important to check out your credit reports because of fraud. When your reports come in you can make sure the only credits that are open, are credits that you have personally opened and should inform the people at Equifax right away if there are any discrepancies because it could affect your credit scores in a negative way.
- a) Break down of Canadian credit scoring criteria. Visit site for more information: http://www.mymoneycoach.ca/credit_rating/what-is-credit-score.html
- b) Here are the effects of credit ratings. http://www.iwillteachyoutoberich.com/blog/how-to-improve-your-credit-score/
The big decision facing a lot of people every morning is Starbucks or “Timmies”? I have found the answer: make your own! One large coffee from Tim Horton’s a day at $1.80 will cost you $657 annually. If you have a Starbucks card, you should ask to see your transactions for the year and I’m sure you will be shocked at the amount you have spent during the year. Taking all this information into consideration, an average household can buy a tin at $25 that will last for roughly 2-3 months, costing you $100-$150 annually. That’s a total of $507-$557 a year in savings just by making your own coffee!
Another big money saver is making your own lunches. I get it, making the same boring sandwich everyday may not be appetizing, so switch it up. Take leftovers, its already done! Not only is it quick and easy but going out for lunch will cost you an average of $7 a day, $35 a week, or $1,820 a year!!! I agree, it’s nice to go out for lunch and a treat but not at that cost. Turn it into a weekly outing with your friends from work. If you just go out once a week, your yearly amount will turn to $364, a savings of $1,456! Why not open up a Tax Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) or pay off your debt with that lunch money? Social outings can also hurt your wallet. Instead of always going out with friends to watch the game, grab a drink, get food, and invite people over. A drink at a restaurant is about $7. For that price you could pool your money, pick up a few drinks, order pizza, and enjoy the game from your own comfortable couch. If you do decide to go out, water is always a good cheap substitute!
Lastly, the one that I was skeptical about until I tried it a few years back was setting up a loonie/ toonie collection. At the end of the day, dump all your loonies and toonies into a jar and don’t touch it. You will be shocked how much money you will have after a while. I was left with $650 sitting in a jar and decided to treat myself to a week long trip to Nova Scotia with friends. It was a memorable experience and best of all, it didn’t put a dent into my bank account! It was money I never thought about and didn’t realize I had, until the trip.
Take advantage of this time in your life to start putting away some money. Many of you are living at home rent free, or with very low rent charges. This is a great time in your lives to save for the future, pay off school debts, open up investment accounts, and put away money to help you get out of under your parents wings and buy your own place, or reach your other financial goals.
Contact us for assistance