How to Save Money
Whether it is preparing to pay off a loan or eyeing up a potential vacation, saving money can be a tough task without a plan. Far too often our immediate financial needs and wants take precedence, while our poor old savings accounts have to take a back seat. During 2018, the average Canadian household savings rate currently hovers at roughly 4.4%1.
That number is far too low to help us relax poolside in the sun with winter coming! So what can we do to improve our savings?
Separate needs & wants in your budget
Having an outlined budget of your expenses will provide you with a clear answer as to where your money is currently going. Certain purchases weave their way into becoming a habit in our life when in actuality they are not necessary at all! Test yourself - stop buying an item for a period of time. If it severely hampers your quality of life then you can categorize it as a need. If not, then trim it from your budget.
God bless technology - automating a monthly transfer into your savings accounts is a surefire method to prevent you from dipping into your piggy bank. Instead of having to deliberate if purchasing that new pair of shoes is a necessary expense, your automated savings has already put your money towards your long-term future.
It is far easier to achieve a task whenever you have a clear goal in mind. A fun way to implement this into your savings habits is to name your various accounts. This method is based “on a cognitive bias known as mental accounting”2. We have a greater tendency to not touch money if it is designated for something else. Think vacation fund, new car fund, emergency fund, etc.
Be smart with your food
Food and drinks when dining out accounts for a scarily large amount of our expenses. Marketwatch noted that millennials spend “43% of their food dollars on food outside of the home”3. Yikes. Needless to say, a larger portion of food-related expenses should be put towards groceries. But even still, we can be careless with our groceries!
Next time you are grocery shopping look for food that can be used in multiple meals, buy in bulk, and shop with a weekly meal plan in mind. Leanne Brown’s “Good and Cheap: Eat Well on $4 a Day” is an awesome guide to start cutting food costs.
Save for large down payments on big purchases
Bigger down payments aren’t necessarily always better. However, the benefits are clear - you will have lower interest and payment rates as well as future borrowing power. Granted, down payments for a car or home take time and diligence. But jumping into these purchases with a small down payment will negatively impact your other savings accounts as you now have another monthly bill to pay.
Get a credit card that rewards you
Nowadays, we all rely on our credit cards for day to day purchases. This is not a bad thing - and can even be great for our credit scores - assuming that we are paying them off accordingly. However, not all credit cards were created equal. Make sure you are taking advantage of the benefits they offer, many provide cashback options or rewards points.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2023 Advisor Websites.