Today’s post is Part 2 of our Money Saving Tips series – click here for Part 1. Many people think they aren’t capable of saving. Though it may seem like there’s not much wiggle room in your budget due to the ever-rising cost of living — there are always ways to trick yourself, to get around obstacles and ultimately increase your money savings! Below you will find part 2 of our Money Saving Tips:

6. Raises and Bonuses from Work

Not everyone receives an annual raise, however if you are offered a raise from your employer, consider putting half of this extra money into savings. If your employer has an RRSP or stock matching plan, you should consider maxing out both of these plans. The return on your investment is better than any other investment option. If you don’t have an employer sponsored RRSP matching plan then consider allocating your extra cash from your raise into an RRSP. If your employer pays bonuses, find out if your employer can pay your bonus directly into your RRSP instead of paying out your bonus, having it taxed and then investing the after tax portion. Many employers will pay your bonus directly into your RRSP which gives you an estimated 15% advantage. Consider these numbers: if you receive a $10,000 bonus pre-tax, and your marginal tax rate is 40%, you will have $6,000 net to invest into your RRSP which will generate a $2,400 refund on the contribution. You would end up with $8,400 invested in your RRSP if you invested your after tax bonus ($6,000 after tax bonus plus $2,400 refund). Alternatively, you can have $10,000 invested by your employer making a $10,000 contribution with your bonus.

7. Overtime

Overtime from work is extra money that you were not expecting. Hopefully you are not basing your lifestyle on the assumption that you will receive overtime. If you are a participant in a pension plan with your employer, your overtime hours should create room for an RRSP contribution and overtime is not built into pension contributions. Again, depending on your circumstances, having overtime paid into your RRSP if you have room is a great option. Alternatively, channelling overtime earning into extra payments on your mortgage or other debt will significantly increase how quickly the debt will be paid off. Financial freedom is only achieved once you are debt-free.

8. Tax Refunds

Tax refunds are not much different than other lump sums of cash that you might come into throughout the year. Allocating your tax refund to help maximize your RRSP is a tried and true way of getting ahead. If you want to save money and accelerate your debt repayments, you can look to use your tax refund generated by your RRSP contribution and allocate this towards debt repayment such as credit cards, lines of credit or your mortgage. The great thing about taking a diversified or multi-prong approach to financial goals, is that you’re not betting everything on one potential outcome. Life will throw everyone some curve balls, so having multiple strategies at work will help make sure you are moving the needle on all objectives.

9. Review your Debt

There are many different ways you can go about reducing debt. One of the most popular strategies for debt reduction is called the “snowball” method. The first step in this strategy is to list all of your debts from smallest to largest. Step two is to make the minimum monthly payment on all debts except the smallest one. You then funnel all of your extra monthly cash flow onto the smallest debt that you have. Effectively allowing you to remove a monthly debt payment from your budget as quick as possible. Over a short period of time, you will see noticeable improvements in your debt level. Each obligation you pay off frees up additional cash flow that you can use to pay down other remaining obligations.

10. Have a Budget or Spending Plan

Discipline is probably the single most important quality that will see you find financial success. Financial discipline comes from a heightened awareness of where you are spending money. In order to meet and exceed your financial goals, discipline will be the only thing that gets you there. Central to this theme is having a household budget. Each month, reviewing your budget will help highlight where you are overspending or underspending. It is important to note that having a budget doesn’t have to mean depriving yourself of fun or a life. It does create some accountability towards reaching your financial goals. Knowing where you are spending will allow you to look at what your wants are costing you versus your needs. Reaching any goal requires some form of sacrifice like eating out less or not purchasing that pair of shoes you really like. There are dozens of smart phone apps that will allow you to keep track of your household income and expenses. HomeBudget with Sync App costs $7.00 on the App Store and allows you to sync multiple devices so expenses are more closely tracked. This is very handy and can provide a better insight into where your hard earned dollars are actually being spent.

Now you have our top 10 money saving tips. By simply implementing tips two, three, four and five from last month’s post, you could easily save yourself between $9,780 and $12,484 annually with little sacrifice. With every debt decision, the details matter and no one situation will be exactly the same. Sitting down with your financial advisor to construct a plan to get out of debt and accumulate savings will help hold you accountable. This is very similar to having a personal trainer at the gym. The trainer at the gym is there to push you and hold you accountable to your goals, the same can be said of your financial advisor. At the end of the day though, you have to want to work towards reaching the goals that you have set. Should you want an objective opinion on this, we would be happy to sit down with you and generate a strategy that will have the greatest impact on your situation. Contact us to schedule a free financial consultation today.

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