Each year families deal with an increased demand on financial resources. Unfortunately, if you do not make saving and budgeting a priority, years will go by and you will make very little progress towards reaching your financial goals. The most common concern clients have regarding retirement is “how much is enough?” or “do I have enough for retirement?”. While the answers to these concerns are unique to each individual, the solution to making sure you reach your financial goals, whatever they may be, are common to everyone. Below you will find part one of our Money Saving Tips – stay tuned for part two next month:
1. Pay yourself first
As novel as this concept may sound, very few individuals commit to this strategy. The earlier you start, the better off you will be. With a commitment to start saving early you will see significant benefits over time. For example, if you started putting $50 per month away at the age of 20 you will have made 540 contributions from age 20 to 65. That is a total of $27,000 over your life, however if you invested this money and earned 6% per year for 45 years, your $50 per month contribution to savings would grow to $137,800 over that same time. If you start this type of saving 10 years later at age 30 and save for 35 years, the $50 per month contributions would work out to be $21,000 over the 35 years, and the savings and growth from 6% per year would result in savings of $71,236. The difference of 10 years of savings translates into 22% less money contributed, but translates to 48% less in future value.
2. Pack a lunch
This is a very easy way to save a significant amount of extra cash. While packing a lunch isn’t free, you can certainly save a lot of money by bringing food you have prepared at home. The average person buying lunch spends between $12 to $15 per day. Let’s say that leftovers or lunch prepared at home can be achieved for $5 per day. This means packing your lunch for work can save between $35 to $50 per week. This can balloon to be even more if you are not organized at home. If you lead a busy life that includes running around for kid’s activities on the weekend, these costs can get out of hand fast. If the average family of four eats out twice on the weekend, you could easily spend another $40 to $50 per meal out with the kids. Again, this all adds up. Getting caught up in this lifestyle is not only unhealthy but it will also cost you somewhere between $500 to $650 per month. Over the course of the year, this will add $5,980 to $7,800 to your annual expenses – not an insignificant amount.
3. Make Coffee vs buying that latte
Let’s face it, habits and routines are hard to change. Many of us love our morning hot beverage, whether it be a regular coffee or one of those very tasty fancy lattes from your local specialty coffee shop. That routine or habit comes with a significant price. If we assume that the average coffee at your café of choice is between $5 to $6, this can quickly add up to $35 to $42 per week, or $1,820 to $2,184 annually.
4. Buy quality used goods vs. new
There are always fantastic quality used goods available on websites such as Kijiji and Craigslist. You can often find gently used items for 30% to 50% of what it would cost to buy the new equivalent from the store. In particular, this includes electronics and home improvements. According to Statistics Canada, Albertans spent an average of $2,601 on household furnishings and equipment in 2016. If we assume this was on new products, you could save $780 to $1,300 per year by purchasing used goods.
5. Review or cancel your cable bill
We all have our favourite shows and are used to having cable in our homes. With that being said, streaming services such as Netflix and Apple TV removes the need to pay what could often add up to $150 per month for a cable package consisting of channels you don’t need. Personally, I got rid of cable over two years ago and our family really doesn’t miss it. If there is a particular show you would like to watch, just buy the season. You could buy three seasons a month for what it costs to have a decent cable package. Digital media is the way of the future so you may find yourself having to pay for the digital subscription to your favourite paper for news. This can be done for $10 per month for most, so the reality is most families can save a bundle of cash by cancelling their cable. We estimate most households could save between $1,200 and $1,800 per year.