Week 5: Saving Money
MONEY SMART CHALLENGE
Money Smart Weekly Conversation Fact: Many Canadians are not prepared for unexpected expenses. 57% have enough savings to cover an unexpected expense of $500 while only 31% have enough savings to pay an unexpected expense of $5,000. (2014 Canadian Financial Capability Survey)
There are 2 Ways to Look at Saving
1)Putting aside a portion of your monthly income as “saving” for:
Emergencies or unexpected expenses
Retirement or Education
Something you have identified and want to purchase in the future
2)Not spending money is “saving” money.
Financial specialists recommend that “savings” should ALWAYS be part of your budget but how much should you save?
No one really wants to answer that question directly but if you are saving 15% of your gross income, you are probably in the ball park.
5% as a short term emergency fund, 5% as a down payment for a large purchase like a car or home, and 5% in a retirement fund or child’s educational fund.
It’s not always simple to suggest the right percentage of income for YOU to save.
If, for example, you’re a high earner, you’d be wise to keep your expenses low and save a much larger percentage of your income.
On the other hand, if saving 15% of your income seems implausible, or even impossible at the moment, we don’t want you to get frustrated. Saving something is better than nothing.
In Week 4 of the Money Smart Challenge, we encouraged you to identify what you value and then to set some financial goals. Possibly, one of those goals had to do with saving money for emergencies or other unexpected expenses such as new tires, a new hot water heater, runners for a growing child, dental work, etc. or for something you want to purchase in the future.
If you set a “savings goal”, why not implement one of these motivational ideas to help yourself stay on track:
“Shout Out” your savings goal on social media to get support and encouragement from your friends and to help make a commitment.
Put up a picture of what you are saving for on a mirror or fridge to keep your saving goal in mind.
Pay yourself first. Arrange for a pre-authorized amount to go into a savings account automatically the day you get paid.
Add a credit card sticker to your credit card to remind you of your saving goal. Drop by our office, #7, 5000-51 avenue, to pick one up or request one to be mailed to you by emailing email@example.com
If you are saving money for a large purchase, here’s how you can save money when you make that purchase by improving your credit score now.
(Written by Christopher Ordolis on the Personal Finance page of www.cbc.ca)
“ Think of your credit score as your resume, and the future mortgage you’ll want down the road as your ideal job. Wouldn’t you want to build a stronger resume before applying for that job? The truth is, not only will an improved credit score allow you to qualify for that mortgage, personal loan or premium credit card, but a higher score means better interest rates which can save you a fortune in the long run.
Let’s put things into perspective by quantifying the potential impact an improved credit score can have on interest savings. Consider a couple looking to buy their first home and seeking a five year fixed mortgage over a twenty-five year amortization period. With an exceptional credit score they can potentially qualify for a mortgage with a low 3% interest rate. However, with a weak to average credit score they probably would pay around 7% or more – that’s at least 3 full percentage points more in interest. On a $300,000 mortgage loan, that 3 point difference will cost them $6,350 a year, adding up to $158,750 more over the loan’s twenty-five year lifetime. On a $600,000 mortgage, the additional interest doubles to approximately $317,500. In short, your credit score does matter.”
NOT Spending Money is Like Saving Money.
Tweak your habits to save majorly, and have your best 2017.
Excerpt from an article (on the Personal Finance page at www.cbc.ca) by Jessica Brooks.
“With a bit of creative thinking it’s entirely possible to have one of your best years this year by actually spending less than ever before. If it sounds too good to be true, it might be that you’re thinking of frugality as a jail sentence. But truly, it can be incredibly liberating to free yourself from old, expensive habits, especially when it means discovering new ways to have fun. The obvious upside is that every moment you’re not spending money is a moment you’re saving it.”
Saving occurs every time you:
Avoid unnecessary investment and bank fees. Check out the Financial Consumer Agency of Canada’s Account Selector Tool to help you compare different accounts and find the one that suits you best. http://www.fcac-acfc.gc.ca/Eng/resources/toolsCalculators/Pages/BankingT-OutilsIn.aspx
Up cycle or recycle furniture, clothes, children’s toys/clothes, tools, sports equipment, household items, hobby equipment. Check out Camrose Buy & Sell Sites on the Internet and Facebook.
Compare prices and shop around for the best price.
Only buy the amount of food you can eat before it expires. If you buy in bulk you usually get a better price, but if it expires before you can get through it all, then food waste drives up your initial costs. Develop a weekly habit of using up your leftovers at the end of every week in soups or stir fries and cutting back on food waste by thinking carefully about what you will actually eat.
Take advantage of “seniors” and “day of the week discounts”. The term “seniors” is different at every retail outlet. I have found numerous places in Camrose where you only have to be 50 or 55 to qualify for the “seniors discount”. Many retail outlets have a certain day of the week when everyone gets a discount. Ask about discounts every place you shop!
Where to Find Money to Save Each Month
Some things are easier said than done—like saving money.
So you want to save money, but where do you find money to save if you don’t have anything extra right now? Here are some great places to look:
1. Get It from Work
Raises at work
When you get a raise, put the extra money you are now earning in the bank. You lived on less before. Do you really need these few extra dollars, or does your savings account need them more?
Bonuses from work
If you get paid a bonus, bank this money as well. You don’t need your bonus for living expenses because it is extra money that you can’t count on—that’s why it is a “bonus” to your normal wages.
Overtime pay from work
In some jobs you can volunteer for extra overtime. Consider working a little overtime each week and then treat your overtime pay as something sacred and save it in a special account.
Extra large commission
If you get paid commission for your job, consider saving a portion of any extra large commission cheques.
2. Get It from the Government
If you get a tax refund, use the money to increase your savings.
If property values have fallen significantly in your community, make sure that your tax assessment value is fair. If it’s not fair, apply for a re-assessment. In communities where property values have fallen substantially, this can save you a lot of money in property taxes.
Claim all expenses
If you are self employed, do you do your own taxes or do you have a professional accountant with a professional designation like CA, CGA or CMA do your taxes for you? If your taxes aren’t being done by one of these professionals, you could be missing out on some big tax savings. If you think that these kinds of accountants are expensive, that may be true, but it is often more expensive to pay the government thousands of dollars in unnecessary taxes than to pay a good accountant a few hundred dollars to find these savings for you
3. Find It in Your Expenses
Track your spending and create a spending plan
Tracking your spending is the very best way to identify areas that you can save money. Written out in black and white, most people are surprised how much they spend and areas where they can cut back become very clear.
START the MONEY SMART CHALLENGE TODAY
by ANSWERING this QUESTION:
Money Smart Week 5 Question: We want to know what is working for you. What’s your best money saving TIP?
Now, What Do I do?
Email your answer to the Money Smart Week 5 Question and your full name and mailing address to firstname.lastname@example.org
Your name will automatically be entered into a draw for a Samsung Galaxy Tablet. (a $300 Value!)
You can enter your name once each week for a total of 17 chances to win!
Answer the question anytime before the end of the Challenge on May 28, 2017 and your name will be entered into the draw for a Samsung Tablet.
So, If you missed answering any of the questions for the previous weeks, go to those weeks and answer the question(s) now.
(NOTE! Only residents of City of Camrose and Camrose County are eligible for the draw for the Samsung Galaxy Tablet.)