Saving Money: What are your strategies?

[daisyville]

There have been threads on RFD before about saving money, but seems it's been a while.

As I sit and take another look at my own personal cash flow and savings objectives, I'm always looking for ways I can stash away more. Now that I'm planning a move (next year), I have a real goal to shoot for.

Recently, I was watching a television show called "Till Debt do us Part", which features a couple who has encountered financial trouble, traditionally with a lot of debt or lines of credit. The financial counsellor examines their situation and tries to give them 'homework' to help them achieve their financial security.

One of her tricks is to use cash for everything, at least for a short while, and puts identified sums of cash in jars for specific uses. I've often seen her put $400 in a jar for a family's grocery needs for the month - which is a forced budget plan. Do any of you do that? Identify a budget at the beginning of a month and put cash aside for those line items?

Here's a few things I do, and would welcome seeing some of your strategies on how you successfully save money.

1. Put funds which aren't needed in the next day or two in a higher interest savings account, and transfer into my chequing account (which I use for daily household business) as needed

2. I carry over draft protection, to help me avoid a NSF charge should my shuffling be slightly delayed, or if I've forgotten something (The couple of dollars I pay on occasion are a lot cheaper than the $35 NSF charge my financial institution levies)

3. I've created a cashflow chart and budget which I follow reasonably well. It helps me avoid spontaneous purchases and plan larger ones. (like the template linked on my signature line)

4. Pay credit cards off in full, on time, all the time. The only exception to this is when some department credit cards offer a no fee, no interest deferral. For instance Home Depot will carry charges of $450 over 12 months for no fee or interest. In these cases, I may spread the amount over 12 months to help me manage my cash flow.

5. I have a life insurance policy to cover my mortgage, in the event of my untimely death, rather than pay insurance through my lender. Far better value, and my beneficiaries will benefit from a reduced principle rather than my lender.

6. Try to be mindful of any tax breaks I have available, and consider tax implications of my decisions throughout the year, not just at tax time.

7. Recently, I renegotiated my mortgage which saves a bit.

8. Make tough decisions about what I need versus what I think I want. (Remind myself that I need a savings!)

9. Share my financial goals with my children, so they'll know if they hear "no", there's a reason for it, not just Mom being a meannie. Additionally, invite them to ask me to justify a purchase or a decision which they can't understand. If I can't justify it to my kids, who can I justify it to?

10. My personal challenge with only me and my daughter at home - not wasting groceries. I have difficulty buying groceries that don't go bad in the fridge, so my new goal is to go shopping more often and purchase fewer things. Not sure how this may result in increased fuel spending - but I'll have to get back to you on that!

Looking forward to hearing some of your successes and challenges....

Trac

[yyz2hkg]

stay away from RFD :lol:

[TrevorK]

There was a thread awhile back, and I took one big one away from it.

When you are going to purchase something that is not a necessity, wait 48 hours. If you still want it after that, then purchase it.



I've found this has held me back from buying many things already, that in hindsight I really didn't need.



Myself, I save my money by not buying what I don't need, and using the little things (20% off gift cards, etc...) to save. I don't live a life of poverty, I just don't live the life of luxury (No new car, no Mexican vacation yearly, etc...). I have a set goal in mind to payoff my house, and I've only got $40,000 left to go. And while doing that, I still have 2 cars, a 1600sq ft house and purchase anything that I really want, while still enjoying all sorts of entertainment (movies, dinner, weekend trips, shows, etc...) on the weekend.

It does me well enough, as I save $30,000-35,000 / year after paying all my bills.

[circa76]

Easiest way to save money.. make a realistic budget!

Personally I usually overestimate expenses by 10% and underestimate my *NET* income by 5-10% (usually I round down to the nearest 500 dollar level - e.g. 3800/month -> 3500/month).

Make sure my lifestyle fits within those numbers (i.e. positive cash flow). Everything else is extra savings that goes in an investment account.

[Chookman]

It'll be different for everyone. For me, I'm a goal oriented person - maybe too much so. My goal was to pay off my home in 6 years. I did it in a little under 3. Because of this, the value of my home is now more than I paid for it in total including interest, lawyers fees, upgrades etc. I never purchase anything unless I have the money set aside for it. As an example, I sacrificed driving a nice car for my mortgage goal. I continue to drive an 18 year old car as I build up my money to be able to purchase a 2-3 year-old car outright - my next goal. I'll never see debt again if I can help it.

I never carry cash which is in contrast to the financial adviser you quoted. Why? For me, I hate to use credit or debit because I know that money is coming out of my bank account balance. If cash is in hand, I find it easier to spend on unaccountable things. I pay for everything I possibly can with credit in order to enjoy a cashback bonus and I always pay the full CC balance ASAP. I only carry 2 CC's. MC and Visa - both with cashback, benefits, and rewards.

If you really want to save money, I feel that eating or drinking out is probably the most money draining habit out there unless you are in love with shopping for "things" - especially things like designer clothes/shoes etc. In this case, it's just willpower or an effort not to shop there.

I like that idea of the 48hr waiting period for purchases. That should be a great help to anyone who buys on impulse. I tend to be the opposite. I tell myself I don't need it and let the deal pass only to find out I should have jumped on it.

[dark169]

Every rasie I get I bump my automatic RRSP contribution to eat up about half of the raise. I was living fine before the raise so only taking home half of th riase still seems like a riase, it also helps with both the tax refund and the retirment plan.

[circa76]

It'll be different for everyone. For me, I'm a goal oriented person - maybe too much so. My goal was to pay off my home in 6 years. I did it in a little under 3. Because of this, the value of my home is now more than I paid for it in total including interest, lawyers fees, upgrades etc. I never purchase anything unless I have the money set aside for it. As an example, I sacrificed driving a nice car for my mortgage goal. I continue to drive an 18 year old car as I build up my money to be able to purchase a 2-3 year-old car outright - my next goal. I'll never see debt again if I can help it.



I was thinking about paying off my mortgage faster also but it didn't make sense as my interest rate was so low and I was so much more by investing. When it comes up for renewal year i'll re-evaluate. But for me, when the interest rate is lower than your average return on your investments (by at least inflation), then it makes more sense to invest IMO.

Same with my car. I bought a new car last year and they offered a really ridiculous 1.8% finance/lease rate. So instead of paying cash for the car, I invested it instead.

[Sylvestre]

I have a huge amount of spare room in my rrsp from when I started working at 17. so right now I put about $1,000 (inc. company matching) into my rrsp per month.
I have a small savings account that I use for "fun stuff". 100 per month goes there. Bonuses and other benefits go there as well.

otherwise, once my bills are paid (the money is set aside each paycheque), I have fun and do whatever I want with the spare.

I know that once I'm saving a sufficient amount, and the bills are paid, then what's left over I can use to enjoy life.

[Chookman]

I was thinking about paying off my mortgage faster also but it didn't make sense as my interest rate was so low and I was so much more by investing. When it comes up for renewal year i'll re-evaluate. But for me, when the interest rate is lower than your average return on your investments (by at least inflation), then it makes more sense to invest IMO.

Same with my car. I bought a new car last year and they offered a really ridiculous 1.8% finance/lease rate. So instead of paying cash for the car, I invested it instead.

I have to agree that it often makes financial sense to carry some low interest rate debt but there's something to be said for the feeling of walking through your front door and knowing that you own the place outright and you don't owe anyone in the world anything. ;)

[dark169]

I have to agree that it often makes financial sense to carry some low interest rate debt but there's something to be said for the feeling of walking through your front door and knowing that you own the place outright and you don't owe anyone in the world anything. ;)

agreed, no point in killing yourself to be mortage free while at the same time work on being mortage free faster. If you use the actual cost of borrowing in your justification for somethign theres nothign wrong with using debt.

For example I'll pay about 2k more for my motorcycle becuase its finainced at 5.7% over 5 years vs if I paid cash, problem is it would ahve taken me 2 or 3 years to save that cash and the 'value' of having the motorcycel those 2 or 3 years far out weighs the $2k. Its pretty hard to justify going out for beers and chanrging it @18% as the value you get over the time you have to payfor it is almsot nil after the first night (hanger over would make it seem even dumber the next day)

A mortage free exisitance is something grand to shoot for, my goal is to be mortage free for a year prior to upgrading to a larger place. Then its 25% down on a new place and the rest into investments/savings, rinse and repeat.

[Jacklad]

One of her tricks is to use cash for everything, at least for a short while, and puts identified sums of cash in jars for specific uses.

Sounds like the "envelope" system, just using jars. Trust me, it's no panacea. That's the problem with a "one size fits all" approach to finance - it really won't suit everyone.

I hate cash, and only ever have enough on hand to satisfy the occasional Timmy's jones. The reason? I can track plastic transactions - debit and/or credit card - instantly. There's never any change to go astray, and never any question of what happens after you break that twenty...

Which doesn't mean I don't budget - I do, and even project several months forward. I download my transactions every day, and can tell you - to the penny - what I have and what I owe. You have to find the methods that work for you, and then use them, not rely on "expert" advice that doesn't suit your personal spending habits.

Jackie.

[TrevorK]

I was thinking about paying off my mortgage faster also but it didn't make sense as my interest rate was so low and I was so much more by investing. When it comes up for renewal year i'll re-evaluate. But for me, when the interest rate is lower than your average return on your investments (by at least inflation), then it makes more sense to invest IMO.

Same with my car. I bought a new car last year and they offered a really ridiculous 1.8% finance/lease rate. So instead of paying cash for the car, I invested it instead.

Look into the Smith Maneuver - basically what you do is apply all your money towards the house, then borrow against the equity. The interest you pay on the portion for investing is a tax writeoff.

This strategy eliminates bad debt (Non-deductable), and turns it into good debt (Deductable)

[arnyk]

This might be unconventional, as well as unrealistic for some, but I like to run my life like a business. This means a monthly budget, and quarterly Income Statements, Balance Sheets, and Cash Flow Statements, followed by an Annual Report.

As an investor, I know how to analyze financial statements and differentiate "good" companies from "bad" companies, and so likewise I can apply this by doing things like identifying early signs of future cash flow crunches in my own life just from glancing at the statements, and of course take corrective action.

Honestly though, I do this because I like it, not because it's absolutely necessary. For most people, just a simple budget will do, I think the hard part for alot of people is following that budget.

[sammy]

not wasting leftovers and using it for the next day's dinner or lunch.

cutting back on takeout lunches at work.

i also plan on getting a crockpot so that dinners will be much easier to make since it's very tiring after work. hope to save on takeout with this. wonder if this will save on hydro.

asking for a price break on internet service by locking into a 1-yr contract. i've even cut back to a lower speed (Bell DSL basic lite) to save some money since i only use the internet at home for fun and not a home business.

using a regular answering machine instead of using the phone companies bells and whistles. i don't have a need for call answer/call display etc. my friends know that i screen my calls by letting the answering machine pick up first and when i hear their voice, i pick up. telemarketers don't leave me messages so it's all good.

when i make a large purchase, i try to negotiate a deal, especially if i'm buying more than 1 item. i always ask if a sale is coming up and whether i can have the sale price. even for just clothing purchases or purchases at the bay/sears, i'll ask if a sale is coming up and whether i can get the sale price instead of waiting.

i don't make a lot of long distance calls, but friends who do like to use phone cards (reputable cards instead of those that cheat you on your minutes).

if i can't make it over to walmart, i buy my toiletries at grocery stores instead of SDM.

i plan my cosmetic purchases (i use shiseido for some items) around the gift with purchase time since the high end cosmetics don't go on sale. also learn what works for your skin. i found that Biore skincare line works very well for me and the quality is excellent. saved me a lot of money by switching from lancome to Biore.

automatic withdrawals from the bank acct to my RRSPs. i may change this from monthly to biweekly to match my payroll deposit.

learning and knowing where you can cut corners without sacrificing yourself (such as your health and safety). for example, i won't cut corners on healthy food, sunglasses and good-quality, properly fitting footwear.

prioritizing what you really want and eliminating what you really don't need to make you happy. i live somewhat simply but also make a good living. i have money for expensive jewelry, expensive clothes and trips but those things don't mean a lot to me. i'd rather have my condo in a nice part of town, good retirement savings and money for dining out with friends and family.

i have friends who must have exotic vacations every year so they cut back on other discretionary items in order to afford their trips.

[pitz]

I pretty much follow the arnyk model. I also don't have either a chequing, nor a savings account, and live entirely on low-cost credit, which I find to be the most economical way of managing finances. I also don't have a debit card, and all of my purchases go onto a CIBC Dividend VISA card. I usually acquire most of my cash (for parking meters and stuff that requires cash) by paying for others' restaurant meals and collecting their cash. Cash loses value constantly due to inflation, and savings accounts aren't much better -- so I keep only minimal amounts around.

Lots of options are available on the credit side -- I'm a total credit junkie. I use a combination of a TD LOC and a brokerage margin account. Manulife One is a decent concept as well if you need to tie in a mortgage.

[pitz]

Same with my car. I bought a new car last year and they offered a really ridiculous 1.8% finance/lease rate. So instead of paying cash for the car, I invested it instead.

Why didn't you just demand that they reduce the price of your new car by the net present value of the subsidy they are providing you on interest?

Low-cost car financing is little more than a gimmick. Usually, if you do the math, it turns out to truly be 7-9% financing, since you forgo a larger up-front discount in favour of discounted interest payments.

[tweetie]

Great post!

I love designer clothes, bags, and nice restaurants and my husband and I always take a trip abroad every year. We balance that out by rarely buying lunches (we make nice dinners at home and bring leftovers most days) and we don't buy coffee/snacks druing the day.

For food, we buy the perishables in small amounts twice a week, and have the non-perishables bought when they go on a big sale or at Costco to save money once a month.

I also use the CC system as well - I like the tracking, and we pay in full every month so you have the benefit of accumulating points and warranty protection.

[st7860]

using a regular answering machine instead of using the phone companies bells and whistles. i don't have a need for call answer/call display etc.
.

Did you know that PRIMUS(and probably Rogers too) offers a Real Home COPPER BASED Landline for about $30/mo, the same price as bell, and you get ONE feature FREE(not a promotion) such as Voicemail or Call Display?

[atforum]

i always save part of my income. Sometimes I earn 900$ a month and some times 460$ depeding on my parttime job. I see to that I save atleast some money even when my earning is 460 ...300 for rent :( 100-200 for montly expense (depeding on that months earning) and the rest (atleast 50$) goes to the bank !!!

I have payed one year tution and living expense from my own earning :D and returned my parents some money that they gave me ;)

[dark169]

another good tip is when you've maxxed out the CPP / EI contributions for the year but the extra take on directly into your savings and/or RRSP's. Of course this doesnt apply to everyone but its a good trick for us middle class folks.

[Rosico]

good thread -

I tend to like gadgets and watch the release dates for upcoming versions.

When a new gadget is coming out (ie. DS -> DS Lite) I'll sell my old one a little bit in advance to maxmise the value. Because once the new versions come out, the older ones value plummets (everyone is selling theirs then).

Oh, I would echo the eating out, especially for lunch. Add it up, it's the latte factor there ... $5 - $10 a day x 5 days x 48 weeks (for me) = ability to buy more toys.

[circa76]

Look into the Smith Maneuver - basically what you do is apply all your money towards the house, then borrow against the equity. The interest you pay on the portion for investing is a tax writeoff.

This strategy eliminates bad debt (Non-deductable), and turns it into good debt (Deductable)

Actually, that's exactly what I'm going to be doing next year. Prior to my renewal, I didn't have enough equity in my home to make it worthwhile (even though I put 25% down) but now I'm going to have alot of equity in my home.. and I'll probably pay off my traditional "mortgage" in 5 yrs or so.

[circa76]

Why didn't you just demand that they reduce the price of your new car by the net present value of the subsidy they are providing you on interest?

Low-cost car financing is little more than a gimmick. Usually, if you do the math, it turns out to truly be 7-9% financing, since you forgo a larger up-front discount in favour of discounted interest payments.

Actually I got the lowest price possible. I went to CarCostCanada.com to get dealer price + $500. In fact, I was going in there ready to pay cash but then they told me of the lease rate. After I did the math, the lease ended up costing about $400 more over the 4 yr term than purchase financing. And since I can make up that difference in a few months by investing the money, it was a no brainer at that point.

[Bullseye]

I find that keeping an up to date net worth statement, with projections into the future (near and far), really helps keep you motivated. You can see your worth growing steadily, and you can take a more long term approach to your finances.

I also like that I can use it to justify spending money sometimes. :cheesygri Like the $5K I'm spending on my backyard currently. Alot of money, but I'm doing most of it myself, and not going into debt for it, so I can easily add at least that much to my net worth, as it increases the value of my house. Of course, I'm doing the work for my own enjoyment, not to add value, but it's still nice to know.

Adding the present value of vehicles to your net worth can also help save you money...you'll see that quickly depreciating vehicle acting like a big anchor on it! For me, that's enough motivation to quench the occasional lusting after a shiny new car.

[daisyville]

Like the $5K I'm spending on my backyard currently. Alot of money, but I'm doing most of it myself, and not going into debt for it, so I can easily add at least that much to my net worth, as it increases the value of my house.


Actually Bullseye, you raise a point which I was reminded of in a MoneySense article recently. Not only are you saving money by doing your own home repairs/improvements yourself, therefore, you're saving the money you could potentially be paying a contractor.

We also need to think when we pay someone else to do work for us, we pay them with after tax dollars. Therefore, if you have a marginal tax rate of 30%, and you've paid somebody $5000 to build you a deck and a fence, the amount you've really shelled out is much more, when you consider you've already paid tax on that $5 grand.

When I did a bunch of work on my home, I tried to do everything that I thought (a) I already knew how to do, or (b) could learn. I learned how to do ceramic tiling, and saved myself a lot of money. It isn't perfect in some spots, but I've seen lots of professional jobs that aren't either.

So - another good lesson. Do it yourself, or see if you can learn how. Home Depot has lots of useful, free, DIY sessions. Any time I went, I was also permitted to use a tool and have someone there to guide me in its proper use.

Enjoy the yard!

[Bullseye]

Deleted.
Stop spamming the board with your scam!

[Sylvestre]

Oh, I would echo the eating out, especially for lunch. Add it up, it's the latte factor there ... $5 - $10 a day x 5 days x 48 weeks (for me) = ability to buy more toys.

gotta disagree w/ this slightly.
for some people, toys aren't the desire, but eating lunch is. you could twist your sentance to say " cutting out buying 'toys' = ability to buy more lunches".

What I'm saying is - if you are saving adequately, there's no reason to limit your spending "vices".

[Rosico]

gotta disagree w/ this slightly.
for some people, toys aren't the desire, but eating lunch is. you could twist your sentance to say " cutting out buying 'toys' = ability to buy more lunches".

What I'm saying is - if you are saving adequately, there's no reason to limit your spending "vices".

Ah yes - it gets back to your goals, priorities and choices.

What I'm saying is that if you cut back on some areas, you have more to spend or save in areas you want. For me, food is an easy one since I like to pack my own lunch.

And Daisy - good point on the after tax cost on labour. The other neat thing is when you buy the tools for your task, you own them and can use them again and again - or rent them once.

[daveinmtl]

Wow... so many great ideas!!

I save into RRSP by automatically deducting it from my pay- this way I don't see it.

I have tried using credit cards to buy everything but I find that when I spend on credit cards I end up getting bills at the end of the month which I have trouble paying off...

So, instead, every thursday or friday I take out a regular amount of cash... if I have run out of money by sunday then i only have to wait a few days until i get more.. if I want something new I need to save some of the cash every week until i have enough.

I have thought of getting a low limit credit card to at least get some benefit from my personal spending, but haven't decided yet....

[kareshi]

i agree with this one...

so u yyz to hkg often?

stay away from RFD :lol:

[AG300]

Since I have learned a big lesson about credit cards, my strategy is

1. If I am buying something big on my credit card, I take my phone and call direct banking to see how much is in my bank account. If my balance is 5x greater than the amount of the item I am going to buy, then ill buy it. Once big item purcase is paid for, I then goto my online banking and pay that amount off right away. (For small items $100 or less I do not bother)

2. I put $500 of my paycheck every month to a high intrest savings account

3. I cut down on take out for work and leisure, if take out is absolutely necessary I go shop around for the cheapest deal.

4. Any loose change I have for the day, ends up in a piggy bank.

5. STAY AWAY FROM THE RFD BUY SELL TRADE OR HOT DEALS SECTION! :D

6. Visit the personal finance and freebies sections of RFD.

These strategies work for people who do not have to pay rent or much bills, like myself (livin with folks) and for students as well.

[vinaymal]

Since I have learned a big lesson about credit cards, my strategy is

1. If I am buying something big on my credit card, I take my phone and call direct banking to see how much is in my bank account. If my balance is 5x greater than the amount of the item I am going to buy, then ill buy it. Once big item purcase is paid for, I then goto my online banking and pay that amount off right away. (For small items $100 or less I do not bother)

2. I put $500 of my paycheck every month to a high intrest savings account

3. I cut down on take out for work and leisure, if take out is absolutely necessary I go shop around for the cheapest deal.

4. Any loose change I have for the day, ends up in a piggy bank.

5. STAY AWAY FROM THE RFD BUY SELL TRADE OR HOT DEALS SECTION! :D

6. Visit the personal finance and freebies sections of RFD.

These strategies work for people who do not have to pay rent or much bills, like myself (livin with folks) and for students as well.


Why on earth would you ever pay for something you put on your credit card before its due ?

[st7860]

Why on earth would you ever pay for something you put on your credit card before its due ?

some people like to do that because they like treating their credit card like a debit card.

[Asun]

some people like to do that because they like treating their credit card like a debit card.

Put the money into high interest savings account like ING. That way it'll earn interest for you. Only withdraw it to pay your CC on the due date.

Hey, wait a minute. If CC charges 18.99% p.a interest rate, then when I put my cash in CC, will they give me 18.99% return? :D