Building savings is vital to financial success. You'll want emergency savings if you face a significant car repair or lose your job. You'll also want to save for longer-term goals such as retirement or your children's education. But sometimes, finding savings is difficult, even when you know you need to save. Perhaps you are enticed by a sale or an item you see in a catalogue or online that you don't really need. You end up spending money you otherwise would have saved to acquire the item.
Budgeting helps prevent unnecessary spending if you build savings into your budget and manage the budget carefully every month. Once you have a solid budget in place, consider these other tips for finding savings.
1. Know where you are spending
Look carefully at where you spend your money with an eye toward cutting back on your spending. Consider how much of your income you may be spending on desires rather than necessities. Once you cut back on your spending, you'll be able to save more.
2. Watch what you spend on necessities
Even though many budget items are necessities, you can still decrease how much you spend on them. For example, make a list and stick to it to save money on groceries. You also can comparison shop, clip coupons, and choose less expensive cuts of meat. Or group errands to save money on gas.
For example, if you are able to save $5 on groceries each week by clipping coupons and shopping sales, you'll end up saving $260 more each year.
3. Mind your bills
Review bills and notice when providers increase their fees. As fees increase, reconsider whether you need the service. If you do, call to renegotiate the increase. Sometimes, providers will offer discounts or package deals if you call. Also, renegotiate rates on services such as your mobile phone, insurance, and credit card interest rates or shop around for better deals.
4. Ask about employer-sponsored savings plans
Ask your employer whether the company offers a savings plan where the money is deducted from your pay. Saving is easier if you never have an opportunity to spend the money.
If your company doesn't offer a savings plan, consider automating the process yourself by setting up automatic transfers from your checking account to savings or investment accounts at your bank.
5. Avoid banking fees
Consider switching to a bank that doesn't charge fees and putting that money into savings or investments instead. Canadians pay an average of $185 a year in banking fees. If you put $185 a year in a savings account for 10 years and earned only 1 percent interest, you'd have about $2,000 at the end of the 10 years. If you earned 5 percent, you'd have about $2,500.
6. Eat out less
Dining out can add up quickly. Consider where you could cut back and find savings instead. For example, could you bring your lunch instead of eating in a restaurant? The average lunch in Canada is $14, yet the ingredients for a simple bag lunch might cost only about $2 to $5 per meal. So, if you brought your lunch from home even just three days a week, you'd save between $27 and $36 a week. Over the course of a year, you will save more than $1,400.
As another example, could you enjoy take-out rather than sitting down to eat and needing to leave a tip? You'd save 15 percent to 20 percent for each meal.
7. Sell items you're not using
If you haven't used something in a year, the odds are you don't need it. Consider selling it and putting the proceeds into a savings or investment account.
8. Avoid scams
We've all heard the saying, "if it sounds too good to be true, it probably is." If someone suggests an investment or purchase, research before committing your money. Otherwise, you could face significant losses. Scams cost Canadians $379 million last year.
According to the Vancouver Sun, top scams in Canada in 2021 were:
- Promises of quick returns while investing in cryptocurrency
- Advance fee loans
- Online purchase scams that entice you to pay for something you never receive, is counterfeit ,or is of lesser quality than you expect
9. Cancel automatic subscriptions
Cancel automatic subscriptions and renewals. Then reassess each subscription or renewal. Do you really read that magazine? Do you have several streaming services and only really use one?
Canceling magazines or streaming services may seem like a small step; however, the savings add up. If you cancel just one magazine and one streaming service, you'll likely save more than $600 a year.
10. Quit an expensive habit
Spending on habits such as smoking, stopping daily at the local coffee shop, or having a glass of wine after work can really add up. Even if you just cut back, you'll save some money. Quitting altogether can provide significant savings. If the habit is unhealthy, quitting or cutting back will also improve your physical health.
Consider, for example, someone who smokes a pack of cigarettes a day. On average, cigarettes cost about $12 per pack. Over the course of a year, a pack-a-day smoker who quit smoking would save 365 x $12 or $4,380. Over 10 years, the same person will have saved $43,800, not including any interest or return on investments.
11. Don't procrastinate
If you wait until the last minute to buy gifts, schedule vacations or air travel, or buy tickets to a concert, you may be paying more than necessary. Make a gift list and plan your leisure activities well in advance so you can shop around to find the best price.
12. Adopt the $5 strategy
One trick to saving money is the $5 strategy. Whenever someone gives you a $5 bill, put it in a jar and don't take it out. You could have a substantial nest egg at the end of the year.
If you don't carry cash, consider investing in an app that will round up all of your purchases and put the extra into a savings account.
The bottom line
Finding savings is difficult, but if you plan and are creative, you can find ways to save regardless of your income. People Corporation's Financial Resource Centre can help you set and achieve your savings goals. Contact People Corporation today.
Written by Salina Shariff, Financial Wellness Leader at People Corporation.
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