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

[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.