Did you know that in the third quarter of 2022, the average net savings of Canadian households was only $1,964? That’s quite the decrease from the previous year’s third quarter when the average was $2,455! Many families even had no savings at all.
Even more concerning is how Canadians say they now need at least $1.7 million in savings to retire.
All those figures show how crucial it is to save as soon as possible, even while you’re still young. The sooner you do, the more likely you can achieve big saving success.
To help you begin, we’ve created this guide discussing our top tips for saving big. So keep reading, as you can apply what you learn here as early as today.
Make an Expense List
If you know what you spend money on, you can determine necessary expenses vs. those you can do without. You can then cut back or eliminate some of the latter, considering they’re only “wants.”
Examples of necessary expenses are food and housing (mortgage or rent). Wants are those you don’t need to survive, such as fancy clothes, movies, and food away from home.
When creating your expense list, separate your needs vs. your wants. Indicate how much you spend on each item.
You may also find it easier to know where to cut back to start saving big if you list your fixed and variable expenses.
Fixed expenses remain constant, so they’re easier to budget for. These include payments for rent or mortgage, other installment loans, and insurance premiums. Services like phone, cable, or internet plans may also have fixed costs.
Variable expenses are those that fluctuate, usually every month. Examples include grocery, food, travel, transportation, entertainment, and clothing. Because these costs change, you may find it easier to cut back on them.
Create a Budget
Once you’ve listed all your expenses, you can create a budget that factors in your total cash inflows. These include all income types (e.g., from your work, business, or investments).
Deduct the total cost of your necessary expenses from your cash inflows. The difference is the money you can spend on wants and put into a savings account.
To raise your odds of saving big, consider following the 50/30/20 rule for saving. It means you must allocate 50% of your income for essentials, only 30% for wants, and ensure 20% goes into savings.
See What Expenses You Can Trim
If your non-essential expenses typically exceed 30%, it’s time to minimize them. For instance, if you love going on vacations, you can keep doing so, but follow these tips to save on travel costs.
You should also consider downgrading expensive subscriptions like cable TV or streaming services. Do the same with your phone plan; you may be overpaying for minutes you don’t use anyway.
Your food away from home, such as restaurant or takeout meals, is another area you can save on. This is especially true as dining out is becoming pricier in Canada. So if you usually eat out five times a week, reduce it to three or even once a week.
High utility bills may also be hindering you from saving big. You can lower your electricity bills by keeping your HVAC system well-maintained. Using natural light and switching to LED lights can also help you save.
Minimize Debt
As of the first quarter of 2023, the average mortgage balance in Canada stood at $349,178. On top of that was the average credit card balance amounting to $3,909. Many Canadians also have other outstanding debts, such as auto and personal loans.
If you also have debts, factor them in when making your budget. Otherwise, you may find it hard to put aside money because of high loan interest rates.
In your budget plan, itemize all your existing debts. Then, prioritize paying off those with the highest interest fees.
For example, suppose you have an active short-term high-interest rate payday loan. In this case, consider paying it off with a more affordable payday loan alternative.
Payday loan alternatives are online loans with more reasonable interest rates. If you qualify for one, you can use its funds to pay off your existing, high-interest-rate loan.
Open a High-Interest Savings Account (HISA)
To stay committed to saving and building wealth, consider putting your money into a HISA.
Compared to a standard savings account, a HISA lets you earn more on interest from your savings. The more money you put into it and the longer you keep it there, the higher your balance becomes. In short, it allows you to grow your money, albeit gradually, while you sleep.
Getting cash from a HISA is easy; you can withdraw anytime, but you may have to pay a fee each time. Knowing it will cost you more may be enough to make you reconsider.
That can help you stay committed to keeping your money in your savings account instead of using it. This may be even more helpful if you’re prone to impulse buying or shopping.
Automate Transfers to Your Savings Account
One of the best ways to grow your savings is to set aside what you want to save immediately. You can easily do this by setting up automatic transfers to your savings account.
Most mobile banking apps allow you to set up automatic transfers to another account. You may only have to enter the amount, the recipient account, and the day you wish to transfer.
Suppose you get your salary every 15th of the month. In this case, you can automate the transfer the following day.
Automatic transfers can help you save as they prevent you from using the money for other things. Thanks to this, you may find it easier to stick to your budget and saving goals.
Time to Achieve Big Saving Success
If you commit to your plan, big saving success is within reach. It’ll take time, but you’ll surely hit your financial goals if you’re consistent.
That’s why as early as now, consider following all our practical advice. The sooner you do, the sooner you can cut back on unnecessary expenses and save big.
If you liked this article, you’d find our other guides here at Credito.ca helpful! Check out our other blog posts now, or talk to our financial experts for more tips!
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