I recently started a new job. I now have benefits, a higher pay, bonuses, and extra incentives. I’m making a little more than $200.00 more per week, roughly $800.00 more a month. This doesn’t include my monthly bonus.
I’m not bragging, bare with me a second and I’ll make my point.
My bills haven’t changed, in fact I have paid off a credit card making my monthly payments LOWER than they were before. Yet up until a few months ago I was STILL living pay cheque to pay cheque. But why? I am now making an extra pay cheque a month more than I once was, with LESS bills – doesn’t make sense does it?
Well, it didn’t to me. So, I decided to take a look at my finances, downloaded a handy little app and poured through my chequing account – online banking, it’s a life saver! I wrote down everything I spent in the month, as well as what I spent it on. Most of that extra money went to nothing, in fact most went to coffee – my hidden shame!
So, I went through this process which was eye opening to say the least. Not only has it helped me save money but it’s also helped me to realize a lot about myself as a shopper and as a person! You’ll find TONS of ways to just save money online, below is how I took a deep look at myself and my bank account and came out ahead!
Take a Look at the Big Picture
However you can, take a look at your finances and put them to paper. Most have online banking now, some may need to go to the bank to get a statement. Print out these copies or work from your computer. When I say put it to paper, I mean it. Take the time and categorize your spending. Write down the amounts, and the reason for spending it. Put them into categories such as: Entertainment, Eating Out, Bills, Clothing, Gifts etc. If you find something you have that doesn’t fit into those categories make a new one, or put it into a Miscellanous category.
Write each amount out, if you have three purchases for coffee at 1.00 each on the same day write EACH of those down on your piece of paper under the Eating Out category. You can do the math at the end, this will help you see just how often you do something and not only shows how much you’re spending, but also shows how often you go to a place. This helps to hammer it home so to speak.
Something like the following:
Bills are non-negotiable. Your mortgage, utilities and credit card bills etc. This doesn’t include things like your internet or cable, that would fall under entertainment. Why? Because those can be cut from your expenses should you need to do so. These may disappear over time, if you pay down your credit card or you finally pay off that mortgage, but generally they aren’t going anywhere!
Entertainment is anything you find, well entertaining. This is where your cable and internet bill goes, even your mobile phone could go here. You can see in this example I’m a bit of a geek, I spend money on comic books weekly – and 10.00 is no where close to what I used to spend – though it is now that I have removed a lot of my collection. Sigh
The eating out category was a HUGE eye opener for me, especially when I was writing down each item as I came across it. Having to write down over 50 times – Tim Horton’s = $$$ for the first month I looked at my spending was torturous.
I’m not exaggerating here either, this is where a LOT of my money was going, it was clear to me that coffee was my Achilles heel. I still enjoy my mocha and cookie today but instead of a daily snack it has turned into a weekly treat. Some may think spending $8.00 for a mocha and cookie a week is crazy, others may think I’m getting a deal – depending on where you hail from. Either way it’s a lot better than spending $40.00 a week right?
Add it all up!
At this point you now have a running tally of what you spend your money on. Take the long list above and calculate your totals, you may end up with something like the sample here.
You’ll see the large totals here. For me this wasn’t as astonishing as the long list I wrote out to begin with. The smaller list didn’t seem as horrible as the large one, which is why I’m glad I did it first. If the first list was my eye opener, then this list solidified my want to change.
It was also the start to my game plan. I didn’t know a lot about budgeting, or savings when I started this, but I could tell my problem wasn’t just about spending or saving, it was my own lifestyle fighting against me. If I was to save then I needed to change how I spent.
Cut the Fat
It seems in this day we always want more, and we ignore whether or not we can afford it. Instead of saving for a better future we spend on instant gratification. I know I did – daily mocha remember.
Cutting out what I couldn’t afford was my first step. I didn’t just cut it out though. It’s super easy to say – “I’ll never have another mocha” but it’s a different story when it comes to doing it. So, don’t just cut yourself off – it won’t work! You need to create an award program, it’s not about denying yourself something, it’s about making that one thing special. I made my mocha day Friday’s – it’s the end of the work week and I look forward to getting one every week. It sounds funny but it helps me get through my week knowing I will get that treat at the end. It also makes me appreciate that mocha all the more since I know I only get the one.
Having it every day lost it’s special treat feeling. I grew up in a household FULL of children. My mother raised us on our own from a young age, and she didn’t get the extra income to get us a treat every day. So, when we all got to go out for dinner once a month to a restaurant, sit down as a family and have that special night it was special. Perhaps that was why I changed my spending habits, I felt like I didn’t get what I wanted in the past and now thought I deserved it.
But I didn’t, and I wasn’t raised to think that way either. Grabbing that one cup at the end of the week really brings me back to those days when I appreciated everything I got because I knew it wasn’t easy to get it!
Tip #1: If you stumble and grab that coffee on Wednesday, don’t just throw in the towel and start up old habits. Continue working towards your goals, understand your stumble and start over the next day.
Coffee was obviously my biggest expense, so not only did I know that it was something I really enjoyed I also knew it was something I just couldn’t remove altogether.
Tip #2: Take your biggest monthly flexible expense and make it your reward!
For me this was coffee, for you it may be something else. If you spend the bulk of your money on going to the movies then this should become your reward – instead of going every weekend, go once a month. Instead of getting that coffee every day, get it at the end of the week.
Take that thing you love and turn it back into something special by not indulging in it every chance you get. This way you’re not depriving yourself of anything, in fact you’re giving yourself something to look forward to, as well as the reward of knowing you managed your money (and yourself) well!
Tip #3: Choose a flexible monthly expense that you can cut out completely, and do it!
For me this was easy. My next highest expense was eating out. I did this instead of bringing lunch to work. I went to McDonald’s or some other fast food joint and bought my lunch daily.
The best part about this for me, I gained money and lost weight! Fast food is horrible for you, so if you’re like me this should be an easy one to lose, bring your lunch to work next time and turn that eating out into another reward, or cut it out completely!
The best way to be able to complete this tip is to choose something that you know you wouldn’t miss. I didn’t like eating at McDonald’s or Harvey’s, in fact I’m not a fan at all, instead this expense came down to me just being lazy and not wanting to make my lunch in the morning, now I just make it at night.
This doesn’t mean that I don’t eat out at all anymore, but I no longer have that daily habit.
So, look at your list, is there something there whether a large expense or small that you could easily remove?
Document it All
I actually stole this little trick from a friend of mine who is currently trying to lose weight. She said the best thing she had done was to make a Food Journal where she writes down everything she eats, when she eats it.
This helped her to realize what she was doing on a daily basis, and how much it ‘cost’ her. Instead of just thinking “I ate well today” she could look at her list, and know the list didn’t lie!
So I did the same with my money. I keep a small little note pad in my purse, every time I make a purchase I physically write it down. This way I have an up to date minute by minute purchase list of what I have bought in the day. This takes me back to my first step of getting to know my spending, it also helps me recall that feeling I had when I originally made my long list of each month’s spending habits.
This holds me accountable for what I purchase, and reminds me that I don’t want to fall back into the same old habits. I also think twice before buying something, writing it down at the cash register has helped me to remove a few things from my list!
If you can’t Actively Save your pennies, become a PASSIVE Saver
Really you should be active in all of your finances, however sometimes automatic is the way to go. Head into your bank and set up some savings accounts. I recommend setting up some kind of Tax Free Savings Account and a RRSP Savings Account. These two will help you on your way to creating a good level of savings for the years to come.
I remember reading once that if you saved 200 dollars every other week from the time you’re 20 you’ll be a millionaire by the time your retire. I wasn’t so lucky to start my savings that early on, and I’m sure others are in a similar boat. However, by setting up these accounts as well as an automatic withdrawal you’ll be able to start saving without thinking about it.
The idea behind this is pretty simple, you have your savings accounts that you can’t just pull money from, unlike a normal savings. If you want to get into your account you need to take time to go to the bank, so you’re less likely to just take the money out. For an RRSP account, you will be docked tax when you withdraw any funds, making it so you’re less likely to take it out.
So, right away you don’t have to worry about just taking the money out when you feel like it. Next set it up to automatically come out of your account every other week when you get paid. You can choose to take out as much as you like, but keep it affordable. You can choose to take this whole amount and put it towards your tax free savings account then as it grows move it to your RRSP, or split the amount in two so you don’t have to worry about it. For example, if you take $100.00 off your pay cheque every time you can set it so $50.00 goes to your tax free savings account, and the other $50.00 goes to your RRSP account. This way you’re building up both accounts and have no need to check in on it. Instead you can sit back and watch your savings grow.
You can also take your savings as move it to RRSP’s once it hits a certain amount, though I don’t suggest moving it all. Instead when it hits $2000.00 move $1000.00 of that over to your RRSP account. This will help your retirement savings grow even more.
Tip #4: If you want to save money but you don’t know where you can find the extra you can use the following: A raise (take the extra weekly amount and put it right to savings it will be like you never received the raise so you won’t even notice it’s gone), extra bonuses, income tax returns, garage sale money etc.
The best advice I could give is to make an appointment with your bank and talk to a manager or other professional. They can help you set out a budget, start your retirement savings and much more!
What are some of your favourite saving tips? Share them in the comments I’d love to hear them!