Whether you set new year resolutions or not, taking one step toward improving your financial literacy and applying that knowledge in 2021 would serve everyone well. Small steps will get you moving in the right direction. Here are some easy ways to get started.
Learn About Personal Finance
Whether you have lots of time or only a few minutes a week, there are plenty of sources of information on personal finance. Here are some solid recommendations to get you started.
Newsletters: Carrick on Finance (Rob Carrick)
Automate Your Savings
No matter what blog, newsletter, podcast or social media account you follow, they will all have the same advice: automate your savings. This means arranging for money to automatically get withdrawn from your chequing account each month and moved to a savings/investment account. This could include your HISA, TFSA, RRSP, RESP or otherwise. This is the single best piece of money advice you’ll ever get.
Use Your Employee Matching Program
If you’re lucky enough to have one, there are very few reasons anyone should be opting out of a corporate RRSP matching program. It’s free money. Plus consider that it will: 1. Get you to your retirement goal faster than if you were only saving on your own. 2. Earn you a tax rebate on BOTH your contribution and the portion your company is contributing.
Extra tip: Use the tax rebate to fund your TFSA and double up your retirement savings with an RRSP and TFSA.
If you don’t have 3-6 months of living expenses saved in a high interest savings account, (the exact amount you need really depends on an individual’s circumstances) it’s time to start.
Extra tip: Find a high interest savings account (HISA) that you can hold within a TFSA so that you don’t pay tax on the interest, but can access funds in an emergency. EQ Bank is offering one of the highest rates at 2.3% (as of today).
Track Your Spending
Even if you just choose ONE variable expense to track, like groceries (other ideas: take-out, alcohol, clothing), you’ll be shocked at how much it helps save money.
Set a budget for yourself for that specific item and then track each purchase throughout the month. Seeing the amount of money you have left to spend will help you make buying choices (Do I want to go over budget or can I do without this item for now?) so that you can stay on budget.
This is such a simple thing, but an effective one. If you get offers for subscriptions or sales notices from your favourite stores by e-mail, unsubscribe from them. There’s always an unsubscribe link at the bottom of those emails. It takes 10 seconds to do and this small step will stop you from being tempted to buy. The fact is, if you need something, you know where to go. Don’t let an e-mail trick you into spending.
For Goodness Sake, Open a TFSA
There is no reason you should be paying tax on the interest you earn in your HISA. (Please tell me you have a HISA?). Online banks like EQ Bank offer a HISA that you can hold within a TFSA. That means all the interest you earn is yours to keep; tax free. Plus, a TFSA has so many other benefits.
Review Your Expenses
Reviewing your expenses takes time and effort, but even having a look at ONE expense could make a difference. Here are the expenses that you’ll probably have the most luck with reducing/eliminating: groceries, take-out, alcohol, streaming services, cell phone, internet, auto and home insurance.
Groceries: 1. Make a meal plan for the week to create a shopping list. 2. A click and collect service eliminates spontaneous end-aisle purchases and allows you to see what’s on sale at a glance. 3. If you shop in-person, stick to your list, no matter how good those bakery items look.
Take-Out: Even if you don’t change the frequency of take-out, but change the amount you spend, it’ll make a difference. Eliminate the drinks or dessert or pick up to save the delivery fee.
Alcohol: Given that we’re in the middle of a pandemic, I’ll only whisper this one….one less bottle of wine at $20 is $20 more you can add to your emergency fund or use to pay down debt.
Streaming Services: You want Netflix. Your kids want Disney+. Everyone wants Spotify. Have you ever considered stopping one or more of the subscriptions for a few months? Or alternating so you only have one subscription at a time? It would work differently for each family, but even giving it some thought might save you a few bucks.
Cell Phone & Internet: Call and ask for a better deal every year. You will almost never hang up without saving something.
Auto & Home Insurance: Call your insurance broker at renewal and ask how you can lower the bill. Bundling or getting fresh quotes are a good start. Also, make sure your profile is up to date for each policy. Have you paid off your mortgage? Are you using the car less? Did you get a new roof, furnace or security system? All of these things affect insurance rates.