One of the hardest questions to answer when it comes to financial matters is “I’m living with a tight budget and want to start saving but where do I generate the funds I need to start saving”? I will be the 1st to tell you it is not simple. But then again what is? There are many ways out there to consistently find ways to save without adding stress to your work life. In this week’s post I will be looking at some great ways that I have employed in my life that really helped me stash away funds for all my endeavours.
#1: The Notion of Saving Season is grossly misunderstood
Many of you may or may not have heard of saving season – it usually coincides with tax season. You see when tax time rolls around – this is when some people realize that RRSP contributions are tax deductible and thus make a large deposit to generate a tax refund. In spite, of this refund people put a lump sum in their RRSP. Now I don’t want to downgrade lump sum saving as it does mean people are saving but it is for the wrong reason. Saving should be habitual and not a seasonal activity. Having small amounts deducted from your paycheque or with an ASP is the best way. That way its done automatically so you don’t have to worry about it.
For example, I personally have a 50$ bi-weekly transfer to a mutual fund portfolio: with a personal savings goal of 10,000$ in the next few years.
Use the following Calculator to see where you will end up in a few years!
#2 Use your tax refund to your advantage
Its very tempting to take a big fat cheque and buy whatever you desires but you have to realize this isn’t the government handing you money. It is actually your own money coming back. It was reported by BMO that only 33% of Canadians use their refund for investment purposes. Please don’t be part of the other 67%! Your refund is a great opportunity to supercharge your saving habits. If you’re scared, use it purchase a non-cashable GIC or mutual fund that penalizes early withdrawals so you are not tempted to spend it. Look at this article for more details!
#3 Low Interest Rates
With interest rates at all time lows, homeowners with mortgages are very lucky. The savings generated from lower interests is huge. Take those savings and use them to your advantage. It doesn’t always have to be saving but paying down high interest debt such as credit cards is a great option too. I don’t know about you but the last time I checked no one is paying 19.99% interest anywhere! Families were living comfortably before with higher rates so lower rates have opened up a new revenue stream not to be wasted.
#4 Nasty Habits Add Up
I’m sure you’ve heard this enough but habits cost money to keep up and as Canadians one of the habits we have is visiting coffee shops almost daily. A recent article did a survey in which a daily trip to Starbucks accumulates to a house over a period of 40 years. That’s right your daily cup of joe equates to over 500,000 in 40 years. Look at the following article: http://www.wisebread.com/heres-how-rich-youd-be-if-you-stopped-drinking-expensive-coffee
#5: Equip Yourself
The more you know about your finances and personal situation – the better you will be. Know your interest rates and your assets and your options going forward. Know how simple products work and variety of accounts offered. This kind of information can be found on bank sites or various investments sites like Vanguard. The more you know the better off you’ll be.
In Conclusion there are many ways to consistently to generate money from your daily life without killing yourself. All of the above are examples and obviously don’t become so frugal to the point where its save save save. I remember one of my trainers telling me a while back “its about being 100% on the ball, 80% of the time.
Disclaimer: All of the above is my own personal opinion. Please do your research before making any decisions and consult with a certified professional. All of the above are examples and should be treated as such.
References:
Calculators: http://www.helpfulcalculators.com/compound-interest-calculator
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