Savings can help you achieve any financial goal. Whether it’s a comfortable retirement, a down payment for a house, or a new car or stereo, you can get there by setting money aside. And best of all, you can have what you want without getting bogged down in debt.
Yet if you’re like most people, you don’t save as much as you’d like to. Or you don’t save at all. Canadians spend more than we earn. Consider that the national saving rate has dipped to its lowest point since 1994. Today’s high energy, home and food prices may make saving seem less possible than ever.
But the time is now. And with a little forethought and effort, saving money is not only possible, it’s easy.
Make Saving a Priority
You’ll be more likely to save money if you make it a priority. Sit down and figure out what you’d like to save money for – retirement, a house, car, college, dream vacation – and how much it will cost. Then make your plan:
- Set a timeline for when you’d like to reach your goal.
- Set a schedule by dividing the total goal amount by the number of weeks, months or pay periods between now and your goal date.
- Be vigilant by treating your savings contribution just like any other must-pay expense, such as rent or groceries.
Find Money to Save
While it may seem difficult sometimes just to make ends meet, chances are you have extra money you didn’t even know about. Here are some ways to find it:
- Keep track of everything you spend for a week. You might be surprised what you’re buying, and what you can do without.
- Make purchases with cash. This can help you stick to a budget and avoid impulse purchases. Simply decide ahead of time how much you want to spend and then set aside that amount in cash before you go shopping.
- Lower your bills. Many creditors will give borrowers a lower interest rate if they’re asked. Also, conserving electricity and gas can make a big difference.
- Rank your nonessential expenses. Keep the ones you like the best and cut the items on the bottom of the list.
- Pack a lunch. Or cook more dinners at home. Eating out at restaurants can eat up a lot of money that could be saved.
Pay Yourself First
You're probably inclined to pay everyone else first – whether it’s your landlord or your grocer or the electric company. But it’s vital to start paying yourself first by saving money. Once you’ve made a contribution to your financial longevity and well being, then you can divide up your money to cover everything else. Don’t worry. You'll more than likely have plenty left over to cover everything you need.
In fact, most banks make this easier. You can have them automatically transfer funds from your checking account to your savings account, money market, mutual fund and other accounts. You might also check with your employer. Companies will often deduct savings from paycheques if asked.
Power of $50 a month
It's amazing what $50 can do. Suppose you make a $3,000 purchase using your credit card. The card has an annual interest rate of 18%. If you only pay the required 2% minimum monthly payment of $60 per month, it will take you a full eight years to clear your bill.
In fact, paying only the minimum requirement each month is a recipe for drawn-out debt despair. But if you nudge your monthly contributions up by just a little bit on each bill — say, $50 — the long-term results can be phenomenal. It is in this area of your life that you can really enjoy "savings." Why not take advantage of it?
An example of what $50 can do
If you have a credit card with a $3,000 balance at an annual interest rate of 18%, and you pay only the 2% minimum monthly payment of $60 per month, it will take you a full eight years to clear your bill. Think about that before you HAVE to BUY that item! What's more, that $60-a-month-for-eight-years payment means you will have paid $5,780 for your purchases — not the $3,000 you thought they cost when you considered buying them in the store. Going the minimum-payment-only route, then, could mean paying almost twice the original price, once your debt is finally paid.
BUT if you can kick in just $50 more a month to your credit-card payments, for a total payment of $110 instead of $60, you can pay off that debt in less than half the time. In just three years, your $3,000 balance will be history. AND you will have saved yourself $1,800 in interest payments. Just $50 a month, as it turns out, can be quite a powerful thing. Imagine what you could do with $100 more per month!