Here are 10 places to get you started
Some things are easier said than done—like saving money. So you want to save money, but where do you find money to save if you don’t have anything extra right now? Here are some great places to look:
Get It from Work
- Raises at work
When you get a raise, put the extra money you are now earning in the bank. You lived on less before. Do you really need these few extra dollars, or does your savings account need them more?
- Bonuses from work
If you get paid a bonus, bank this money as well. You don’t need your bonus for living expenses because it is extra money that you can’t count on—that’s why it is a “bonus” to your normal wages. Bonuses are perfect for saving. If you need your bonus for living expenses, you probably have other financial challenges that need attention first.
- Overtime pay from work
In some jobs you can volunteer for extra overtime. Consider working a little overtime each week and then treat your overtime pay as something sacred and save it in a special account.
- Extra large commission
If you get paid commission for your job, consider saving a portion of any extra large commission cheques. It is so easy to blow money and then not know where it went. Use some of your extra large commission cheques to create something you will remember—a nice retirement, a comfortable home, or something else that you would like to save for. Use your savings to create a reward for yourself that will last.
Get It from the Government
- Tax refund
If you get a tax refund, use the money to increase your savings. To find out how to pay less tax so that you can get a tax refund or qualify for a larger refund, speak with your tax advisor or someone you trust. Two ways that many people reduce the amount of tax that they have to pay is by contributing to an RRSP and/or by donating more money to charity. If you set up an automated system where your RRSP or charitable giving is automatically debited from your bank account or deducted from your paycheque, these options can be easy and affordable.
- Tax Assessment
If property values have fallen significantly in your community, make sure that your tax assessment value is fair. If it’s not fair, apply for a re-assessment. In communities where property values have fallen substantially, this can save you a lot of money in property taxes.
- Claim all expenses
If you are self employed, do you do your own taxes or do you have a professional accountant with a professional designation like CA, CGA or CMA do your taxes for you? If your taxes aren’t being done by one of these professionals, you could be missing out on some big tax savings. If you think that these kinds of accountants are expensive, that may be true, but it is often more expensive to pay the government thousands of dollars in unnecessary taxes than to pay a good accountant a few hundred dollars to find these savings for you. If you are really thrifty, you can try out the accountant once to see if you are missing any deductions, and then you can go back to your old way of doing taxes and use the tax saving tips that you learned from the accountant.
Find It in Your Expenses
- Look for an expense to cut and save that money
Some people suggest that you increase your savings by cutting back on lattes or quitting smoking, these are good suggestions but there are also other big ways to save money. One way that a lot of people can save money—but something they often overlook—is to take a serious look at what they spend on their hobbies. Some people spend huge amounts on personal trainers, protein supplements, golf, skiing, and other sports. They don't even consider how much they spend because they believe that they are spending it on something healthy or on something they love. If you have a pressing concern—like getting out of debt—cutting back what you spend on a hobby, even just for a while, may be a great option to consider.
If you’re looking for money to save, your expenses could be a gold mine. Here’s one great place to look: the average vehicle owner spends $9,000 per year to own and operate their vehicle. Is there any possibility you could downsize to a smaller, more fuel efficient vehicle, buy a quality used vehicle rather than a brand new one, move closer to work, car pool, or take transit? Here’s another way to think about this: the average Canadian car loan payment is $570 per month. If someone invests this from age 25 to 65 in mutual funds or an index fund and receives an average rate of return of 11% (what the S&P 500 has done over the past 70 years), they will have over $4.2 million at age 65. Is always having a new car worth $4 million to you? Consider buying a quality used car and invest the rest. Your old car payment could literally end up funding your retirement (by the way, it's never too late to start saving. If the person in this scenario saved this car payment from age 40 to 70, they'd still have a million dollars).
Another easy way to find money to save is to look at credit card statements for the last few months and see what you could have gone without and would be able to survive going without next time. You save even more money if you leave the credit cards at home and only pay with cash. Studies show that we tend to spend 15% more when we pay for things with credit. For the average Canadian household who puts everything on credit, they could save over $3,000 a year if they bought everything with cash instead. Sure they'd have to give up their points or cash back, but assuming they used the best cash back cards in Canada, they'd only be giving up $400. They'd still be looking at a big win.
- Review your debt payments
Take a look at the interest rates on any debt payments you may have. Regardless of how low your interest rate is on your line of credit, credit cards, mortgage or a loan, if you look around and see what other companies are offering for the same product you may find that you can do better. If you're paying 5% interest on your line of credit, you may be able to show your bank that others are paying 3.5% and get them to do the same for you. If you're paying 20% interest on a credit card, see if your credit card company has a lower interest rate card. You may be able to get them to move you to a 12% card, or you may be able to find an even better rate somewhere else. If you have a mortgage, have a chat with a mortgage broker and make sure you're getting the best rate possible.
If you are carrying balances on credit cards or store cards, review your balances and your monthly payments. If you have a balance of around $1,000 on one card, you may be making $30 monthly payments. Find a way to pay off this balance with a bonus from work, a tax refund, or by increasing your payments. Once you've paid off this debt, you'll have $30 more to work with each month. Use this approach on your next smallest debt, eliminate it, and you'll free up even more money each month.
If you're struggling to make the minimum payments on your debts, your best move may be to sit down with a non-profit Credit Counsellor, have them review your financial situation, and see what your best options are to get your finances back on track. If you're really have a tough time making ends meet, you may qualify for interest relief.
- Track your spending and create a spending plan
Tracking your spending is the very best way to identify areas that you can save money. Written out in black and white, most people are surprised how much they spend and areas where they can cut back become very clear. All you need to do is track your spending for one month to get a good idea of where your money is going. Many people think, “Oh, I don’t need to do that. I already know where I spend my money.” The truth is surprising to most people; they really don’t realize how much they spend. You can’t say that you know how much you spend unless you have tracked your spending.
Once you’ve identified where you are spending your money, and you see areas where you would like to reduce your spending, you need to set an amount that you think is reasonable to spend and stick to it. To stick to your spending limits, you need to create a spending plan, and then follow your spending plan by only spending the amounts that you set out to spend in your plan. This is a very simple thing to do and it is a very effective method to control you spending. It is often called budgeting.