How to Save Money in 6 Simple Steps
Saving money might seem a near-impossible task when you have bills to pay. For many of us, maintaining regular financial obligations like a mortgage, car payment, and groceries can leave little cash left over for savings. Even for those of us that have our finances under control, it’s always worthwhile to check if there are money saving opportunities elsewhere.
If you’re serious about saving more money, here are 6 universal steps to take no matter your financial circumstances!
Reduce Expenses When You’re Paying Too Much
One of the most fundamental ways to save money is to reduce major expenses in your budget, beginning with a review of your regular monthly bills. Any recurring payments present an opportunity to cut costs. When you trim a monthly bill, it saves you money every month!
Sometimes reducing a regular bill is as simple as taking some time to see what else is out there. Look for better car insurance rates, or a discount if you bundle insurance products. Likewise, it’s worthwhile to spend a weekend afternoon shopping for bank accounts with lower or no fees, or switching to a better mobile phone plan. Saving as little as $9 per month will put more than $100 in your pocket over the course of a year!
And if you really want to make a dent in your monthly budget, try to see if it’s possible to refinance a mortgage for a lower interest rate. Since housing is often the largest expense in most budgets, focusing your spare time on reducing housing-related costs could very well give you the biggest expense reduction relative to the amount of time you spend researching.
After you’ve reduced major expenses, move on to cutting down smaller ones. Try to scale down utility bills and consider switching to generic instead of brand name foods at the grocery store. Once you start looking for opportunities to save money, you’ll be surprised how many you find!
Start Budgeting for Real
A budget isn’t just about restricting or limiting your spending. It’s about allocating your money where it needs to go to give you the life you want. If you don’t know exactly how much money you have or where you’re spending it, chances are your money’s not going to the right place! A good budget includes a category dedicated for savings, with a fixed amount you contribute each month.
You can make a budget in a notebook or spreadsheet if you want to do it the old school way, but there are tons of budgeting apps out there to make the process faster and more precise. These tools will track your spending, help you pay off your debt, and motivate you to meet your financial goals.
Pay Off Debt
If you have debt, you have money going toward a balance owing that would otherwise stay in your pocket. To eventually reclaim this cash flow as your own, you need to pay off the debt.
One of the reasons people often struggle to get out of debt is because their debts have high interest rates. Consumer debts, like credit cards, often have interest rates around 20%. These debts are hard to pay off, because frequently a large portion of each payment goes toward paying off just the interest rather than paying down the principle balance itself. For this reason, one of the best things you can do to get out of debt quickly is find a way to reduce your interest rates.
The best way to save money on interest is to move your debt (or debts) to a lower interest rate. Balance transfer credit cards can accomplish this, as they allow you to move your debt from a high-interest credit card to a lower-interest one. Other means of reducing the interest rate on your debt include personal consolidation loans or even taking out a consolidation loan from a life insurance policy. When it comes to evaluating possibilities, look for the lowest interest rate with the most manageable repayment terms for your budget.
Once you’ve moved your high-interest debt to a lower interest option, it’s imperative you don’t build up the debt again. If you’re worried about staying disciplined, cut up the high-interest credit cards or even close the accounts so you’re not tempted to ring up the balances again.
If all your bills and debts get their own category in your budget, you should too. Once you know how much you can save each month, set up an automated savings transfer from your chequing account to a high-interest savings account. This will make your savings feel like a regular monthly bill, except the money is going to you!
If you’re trying to figure out how to save money fast, look for saving apps that can help you meet your goals. There are plenty of tools out there to make savings easier through special features like offering cash back or rounding up purchases to the nearest dollar and saving the difference. This is the perfect solution if you’re not a natural saver and want it to happen automatically.
Make Your Money Make You Money
Once you’ve managed to set a little money aside, the best thing you can do is make it work for you. Instead of leaving your cash to languish in your chequing account earning no interest, invest it to earn the highest return you can.
If you’re intimidated by the prospect of investing, you can choose a hands-off approach like mutual funds or a robo-advisor. If you’re more comfortable taking charge of your own portfolio, you can invest in stocks, bonds, and ETFs through a brokerage firm. Make sure to put your money in a tax-advantaged account like the TFSA, RRSP, or RESP to really get the most bang for your buck. Still feeling overwhelmed? Seek out a fee-only financial advisor to guide you in the right direction.
Earn Every Time You Spend
Supercharge your savings by topping it up with cash you earn by spending money! Cash back and rewards cards can generate extra income for every purchase you make. You need to pay bills and buy groceries no matter what, so you might as well earn a little extra income doing so. Even small amounts add up over time, so don’t shy away if the return seems low at first. 1% doesn’t mean much on a single grocery bill, but after a year of buying food it can add up to quite a bit!
These money saving tips will help you no matter where you’re starting from. Whether you’re saving for a specific goal or just for a rainy day, there’s plenty you can do to put away money today for what you want tomorrow.