Here is a list of things that I try to do in order to minimize my spending. Please note that these will not work for everyone, and I know that there it lots of room for improvement, but these are the things that I actually do and I will comment on them.
1. Cut down the cable/internet - This goes for the phone as well, but by looking at how much you are spending on Cable and Internet and lowering this down can save you significant money in a month. I rarely watch television, so just have the lowest 20 channels on, and in the summer I haven't hardly watched any television. In the winter, this may change though. I used to live with a roommate who was a gamer and needed ultra high speed internet, then my sister moved in and worked from home and connected to her work computer so she also needed a good connection. Now I still have high speed internet, but saved almost $40 per month by switching down.
2. Minimize your phone bill - I pay about $50 per month for my Bell phone bill. There is no call-waiting, call answer or any of those features that do not come free with the line. I also do not have a cell phone, where from what I hear the prices can become huge in a month. Similarly, I do not text message (not having a cell phone prevents this nicely). I realize that this is much more difficult for people who have already had these "luxuries" to go without them (or if you have teenagers), but it is something that I have done.
3. Stop going out to eat - My family will note that this happens occasionally, but this is just a question of mathematics. No matter where you go to eat, it will cost 2-10 times more than if you cook it yourself. I can hear what you are thinking, "I can't make a lasagna for less than $10 and I can get that at such and such a restaurant for that". That may be true, but you won't be cooking yourself an individual sized lasagna. It’s true that preparing your own foods takes time, and after a hard day at work it is much easier to go out, but financially it doesn't make sense. As well, everyone in the world pretty much got a lunch packed for them as a kid going to school. Please try to do the same thing for yourself at lunch at work. I also walk by a Tim Horton's everyday going to school, but have got in the habit of taking a travel mug of my own coffee with me so the temptation isn't there. I will admit that my new habit is to bring a travel mug with me for a long car ride and stop for a coffee after a few hours, but no one is perfect.
4. Never buy something when it immediately comes out - If you wait six months (or longer) after a product comes out, it will be significantly cheaper (almost no matter what the product). The negative comes that you have to wait this time, but financially it makes sense. If it is a car, wait until a year and buy one used (and save yourself huge money). If it is a television, you can buy the brand new 58 inch flat screen, or buy last years 32 or 44 inch model for a fraction of the cost (I do not have a flat screen television by the way, but am dreaming of one). The point is, when a product comes out, it is much more expensive, so feel free to wait for a bit for a price drop.
5. Minimize your car expenses - I do not own a car (although my girlfriend does), so my car expenses are pretty much at zero. If you are in a family and can go down to one car, the savings are huge. If you are unable to go down to one car, feel free to buy a used car. The savings are tremendous.
6. Shop around - The quote from one book is "a dollar saved is two dollars earned". Ignoring the tax implications for now, if you are purchasing a product, why not try to get the best deal on it? Try not to be an impulse buyer (although I totally am and if I see the sign that says "Sale" or "Limited Time Offer" I usually fall for it). I try to say to myself "In the next month I will need a new _____" and then look at 3 or 4 stores every weekend for the next month to find the prices and then look for when the price drops and pick up the product then. If you purchase things at the end of season and out of season, great deals can be had as well.
7. Pay cash - This is for people with no willpower like me. I set myself a budget. I take out ____ for spending every two weeks. When I run out of money, I stop spending. It's as easy as that. You can be as harsh or as lenient as you want in this manner, but by changing your spending from a variable expense (that changes week to week) to a fixed expense (that is the same each week), you can more easily plan to save and pay things off. This has probably been the best thing that I have done to limit my spending. I will rarely use my credit cards now(except when purchasing medical supplies), and the savings have been tremendous.
Sunday, August 9, 2009
Wednesday, August 5, 2009
How To Save Money
We have had lots of guests at our house in the last two weeks. A lot of great conversations and great discussions. Inevitably, the discussion turns to my boasting for my goals of 2009, one of which was to read 200 books (it turns out that is much more difficult than it sounds...I am only at 33 so far so my revised goal is 52 books).
As they go by my bookshelf which shows my reading accomplishments for 2009, they come across "The Automatic Millionaire" and they say "I wish I had that book, I can't save anything". With the discussions that my family had with my aunt and uncle, they borrowed the book (along with "The Wealthy Barber") to give to their adult kids to put them on the path to savings.
Other discussions with other friends turned to stories of how they would never be able to save enough for a house. This post goes out to all of you (and you in cyberspace) that need a push to getting started on savings.
Most people who read financial blogs (myself included) have been savers for years and don't remember the first time they began saving. For myself, I had just read the "Wealthy Barber" and decided to go to the bank and take advantage of the automatic withdrawal and automatically contribute $50 each paycheque to my RRSP. I had read in that book (or a book similar) that you would be able to do it, and that you wouldn't notice the difference in your spare cash, and it was right.
It also mentioned that savings is a little addictive. Meaning that it feels good to see your assets rise. The reason for this is because of compound interest and the fact that the more you save, the more you earn.
My best advice is just to start saving with automatic withdrawls. The best way is to use an RRSP, which can be purchased from whatever bank you want from as low as $25 at a time. I would recommend an Index Fund, because of the low costs. If you aren't sure that you can afford it, just put the minimum in ($25 per paycheque). My other recommendation is that whenever you get a raise, to put half of the raise into your savings. So if I started this year with $25 per paycheque in my RRSP and then I got a $100 raise, I would have $75 per paycheque put into my RRSP after the raise.
The advantage to using an RRSP is the immediate 30% tax exemption that you get for it (or whatever your tax rate is). Some of my friends have begun RRSPs as soon as they hear the amount that you get in taxes back. No one wants to pay taxes, and this is the best way to do it immediately.
If you are saving for something other than your retirement, like a house, a great option is the Tax Free Savings Account. In this account, you can earn interest tax free (unlike regular investments where you have to pay taxes on your earnings within the account, and also unlike RRSP where you pay taxes on the money that you withdraw). You can also purchase mutual funds within these accounts.
It should be mentioned that if you are purchasing a house and live in Canada, you can take advantage of the First Time Home Buyers tax credit and can withdraw up to $25,000 from your RRSP towards your down payment. Please note that it has to be repaid over 15 years.
In the end, please just begin to save. With the automatic withdrawals, it is done automatically and after the initial setup takes literally no willpower at all. Then you will look back after a few months and say "Wow, I have just saved a lot of money!".
As they go by my bookshelf which shows my reading accomplishments for 2009, they come across "The Automatic Millionaire" and they say "I wish I had that book, I can't save anything". With the discussions that my family had with my aunt and uncle, they borrowed the book (along with "The Wealthy Barber") to give to their adult kids to put them on the path to savings.
Other discussions with other friends turned to stories of how they would never be able to save enough for a house. This post goes out to all of you (and you in cyberspace) that need a push to getting started on savings.
Most people who read financial blogs (myself included) have been savers for years and don't remember the first time they began saving. For myself, I had just read the "Wealthy Barber" and decided to go to the bank and take advantage of the automatic withdrawal and automatically contribute $50 each paycheque to my RRSP. I had read in that book (or a book similar) that you would be able to do it, and that you wouldn't notice the difference in your spare cash, and it was right.
It also mentioned that savings is a little addictive. Meaning that it feels good to see your assets rise. The reason for this is because of compound interest and the fact that the more you save, the more you earn.
My best advice is just to start saving with automatic withdrawls. The best way is to use an RRSP, which can be purchased from whatever bank you want from as low as $25 at a time. I would recommend an Index Fund, because of the low costs. If you aren't sure that you can afford it, just put the minimum in ($25 per paycheque). My other recommendation is that whenever you get a raise, to put half of the raise into your savings. So if I started this year with $25 per paycheque in my RRSP and then I got a $100 raise, I would have $75 per paycheque put into my RRSP after the raise.
The advantage to using an RRSP is the immediate 30% tax exemption that you get for it (or whatever your tax rate is). Some of my friends have begun RRSPs as soon as they hear the amount that you get in taxes back. No one wants to pay taxes, and this is the best way to do it immediately.
If you are saving for something other than your retirement, like a house, a great option is the Tax Free Savings Account. In this account, you can earn interest tax free (unlike regular investments where you have to pay taxes on your earnings within the account, and also unlike RRSP where you pay taxes on the money that you withdraw). You can also purchase mutual funds within these accounts.
It should be mentioned that if you are purchasing a house and live in Canada, you can take advantage of the First Time Home Buyers tax credit and can withdraw up to $25,000 from your RRSP towards your down payment. Please note that it has to be repaid over 15 years.
In the end, please just begin to save. With the automatic withdrawals, it is done automatically and after the initial setup takes literally no willpower at all. Then you will look back after a few months and say "Wow, I have just saved a lot of money!".
Sunday, August 2, 2009
Two Good Links From The Toronto Star and more!
My girlfriend was reading the Toronto Star online and found these excellent articles that she thought that I'd love (and I do). Here they are:
Teenagers Lacking Education On The Financial Facts of Life - A good article discussing how there is no formal financial education in the Ontario curriculum. As a math teacher, I totally agree and would love to teach a course like this. As mentioned in previous posts, I try to do this as much as possible already, but a formal course on finance would be great! As the article says, there is a formal Grade 10 course in Careers and Civics, you could throw a financial course in there as well and it would be great!
Frugal or cheap - This article discusses when even frugal people put a limit on the quality of the things that they purchase. My favourite quotes are "The distinction between frugality and a tightwad is that, for a tightwad, it hurts to spend" (my girlfriend thinks this makes me a tightwad, but it only hurts me to write cheques) and that a spendthrift is "...unable to feel distress even when financial situations take a turn for the worse".
A third good link (although not from the Toronto Star) is Million Dollar Journey's Paying Off Debt: Lowest Balance or Highest Interest First? where the consensus is that it is better to pay off debt in the way that motivates the individual the most. I couldn't agree more.
All articles are great reads, so take a look!
Teenagers Lacking Education On The Financial Facts of Life - A good article discussing how there is no formal financial education in the Ontario curriculum. As a math teacher, I totally agree and would love to teach a course like this. As mentioned in previous posts, I try to do this as much as possible already, but a formal course on finance would be great! As the article says, there is a formal Grade 10 course in Careers and Civics, you could throw a financial course in there as well and it would be great!
Frugal or cheap - This article discusses when even frugal people put a limit on the quality of the things that they purchase. My favourite quotes are "The distinction between frugality and a tightwad is that, for a tightwad, it hurts to spend" (my girlfriend thinks this makes me a tightwad, but it only hurts me to write cheques) and that a spendthrift is "...unable to feel distress even when financial situations take a turn for the worse".
A third good link (although not from the Toronto Star) is Million Dollar Journey's Paying Off Debt: Lowest Balance or Highest Interest First? where the consensus is that it is better to pay off debt in the way that motivates the individual the most. I couldn't agree more.
All articles are great reads, so take a look!
Saturday, August 1, 2009
Net Worth Update - August 1st, 2009
Every time I get paid (every two weeks), I update my net worth. The idea behind this is that my goals are that my liabilities drop every two weeks, and by tracking them in this way, I am able to get a nice picture of where I stand financially. Its not a perfect balance sheet that I have (because of student loans I have a negative net worth), but the progress is what I am looking for.
ASSETS:
- up $654.84 from July 17th, 2009
- up $5838.77 from August 1st, 2009(one year ago)
These assets include my house (I give it 1% appreciation each year in my appreciation), my RRSP and my TFSA. The market swung up a bit in the last two weeks (my brother even told me that his investments are above zero percent all time meaning tha the recovered his losses from the last year/this year...I am not quite so lucky)
LIABILITIES:
- better $847.39 from July 17th, 2009
- better $11,241.25 from August 1st, 2008 (one year ago)
These liabilities include my mortgage, student loans and a consolidation loan (mainly for my Masters Degree for teaching). Additionally, my credit card would be on here near, but it has had a (near) zero balance in 2009.
NET WORTH:
- better $1502.24 from July 17th, 2009
- better $17,080.02 from August 1st, 2008 (one year ago!)
Those are excellent numbers once again! A few realities about my current situation though:
1) I am currently teaching summer school, basically giving me double paycheques throughout the summer. I got my first paycheque for about $700 or so, affecting my assets and my liabilities.
2) Because of the way the month fell, I got three pays in the one month, giving me some more disposable income.
The last thing I am going to track is the value of the TSX. I have some asset allocation goals that I will share in future posts, and they are dependent on the value of the TSX.
TSX Graph
Current Value: 10,787.15
Highest Value in Last 2 Years: 15073.13 June 18th, 2008
ASSETS:
- up $654.84 from July 17th, 2009
- up $5838.77 from August 1st, 2009(one year ago)
These assets include my house (I give it 1% appreciation each year in my appreciation), my RRSP and my TFSA. The market swung up a bit in the last two weeks (my brother even told me that his investments are above zero percent all time meaning tha the recovered his losses from the last year/this year...I am not quite so lucky)
LIABILITIES:
- better $847.39 from July 17th, 2009
- better $11,241.25 from August 1st, 2008 (one year ago)
These liabilities include my mortgage, student loans and a consolidation loan (mainly for my Masters Degree for teaching). Additionally, my credit card would be on here near, but it has had a (near) zero balance in 2009.
NET WORTH:
- better $1502.24 from July 17th, 2009
- better $17,080.02 from August 1st, 2008 (one year ago!)
Those are excellent numbers once again! A few realities about my current situation though:
1) I am currently teaching summer school, basically giving me double paycheques throughout the summer. I got my first paycheque for about $700 or so, affecting my assets and my liabilities.
2) Because of the way the month fell, I got three pays in the one month, giving me some more disposable income.
The last thing I am going to track is the value of the TSX. I have some asset allocation goals that I will share in future posts, and they are dependent on the value of the TSX.
TSX Graph
Current Value: 10,787.15
Highest Value in Last 2 Years: 15073.13 June 18th, 2008
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