Life on the cheap - how saving money on the everyday can be huge longterm


When it comes to saving money, most people think of forcing themselves to stick to a budget and savings plan that deprives them of all things fun. But optimizing your finances only requires you to stick to a few simple rules to get the most out of your money.

Cut your largest expenses first

When many people think of cutting costs, the first things that often come to mind is clipping grocery store coupons and cancelling your Netflix subscription. But trimming a few dollars off a few monthly bills likely won’t lead to any dramatic changes in your financial life. Instead, aim to reduce your 3 largest expenses by at least 15%.

For example, if you rent can you try negotiating for lower rent when your lease is up, or even moving to a cheaper place? If you’re a homeowner, it’s harder to reduce housing costs but still possible. Interest rates are lower than ever, and refinancing might be worth the hassle if it saves you enough on your monthly mortgage payment.

Likewise, you can downsize to a smaller, cheaper car, or even sell yours and switch to relying on public transit. Most people are unwilling to make big lifestyle changes, but they are the shortcut to long term financial security. And tackling big expenses means small ones can stay where they are: you can keep your daily latte if you’ve reduced your housing costs by $300!

Furthermore, cutting costs can always be temporary. Reducing your rent or going without a car might be something you only do for 2 or 3 years to pay off a debt or save money for a down payment. Once you’ve achieved your financial goal, you can go back to your previous lifestyle!

Cutting costs on transit can be a game changer

Park your cash (and make it work for you)

Saving is great, but investing is better. Don’t leave your hard earned dollars sitting in a low-interest taxable savings account. Everyone should open a Tax-Free Savings Account (TFSA), and higher earners with incomes over $70,000 should open a Registered Retirement Savings Plan (RRSP) as well.

Open your TFSA and/or RRSP with an account that lets you invest either directly or through an automated service, and get it invested in the stock market. If you choose something automated it may select the index funds for you, but if you have a self-directed account, you’ll need to research and pick the ETFs yourself. Whichever you choose, remember the more passive your approach, the better. The average investor (that’s you) will probably do better selecting broad market index funds than trying to pick the next winning stock.

Set up automatic weekly contributions to your savings and investment accounts

Once you have your long-term savings and investment accounts set up, the secret to making them grow is to contribute on a regular basis. While most financial advice will tell you to contribute to your accounts monthly, you might find it easier to do so on a more frequent basis like bi-weekly, or even weekly. Putting $200 towards savings once a month can feel like a big expense, but $50 per week is so small you may not even notice it. Furthermore, saving more frequently will actually result in you saving more money – where monthly contributions only put cash away 12 times per year, a bi-weekly contribution means you’ll make 26 deposits and set aside 8% more each year!

Stop spending on things you hate

Spending money isn’t bad or wasteful, unless you’re doing it on things you don’t even want. If you don’t think you’re guilty of this, ask yourself if you’ve recently experienced buyer’s remorse, or looked at your credit card statement and couldn’t even remember what all the transactions were for.

Your spending should be purposeful, deliberate, and improve your life! If it’s making you miserable, you’re doing it wrong. Look critically at your past 3 months of debit and credit card statements. You can even go through them with two different colored highlighters and mark all the purchases that made you happy, and all the ones that didn’t.

Be ruthless about cutting expenses that don’t add anything positive to your life. Maybe your premium Spotify membership is worth it but your premium spin cycle studio membership is not. Some expenses might simply need to be optimized, like switching from the drop-in fee at your yoga studio to a monthly unlimited membership. Others might need to simply be wrangled into more reasonable parameters. Did you really need lunch from that expensive sushi place 8 times last month? You can cut down on expenses without cutting them out, which helps keep your happiness and your budget balanced.

Consuming with
a conscience

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