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We all know how daunting it can be to thrive on a medium budget these days. This is why learning how to save money is a key skill for a bright financial future.
The average person in North America about $950 per week which makes $3,800 a month. These numbers aren’t satisfying enough considering the rising costs of groceries, transportation, education, health, and entertainment. Some Alarming Facts:
- The cost of accommodation in North America is around $990 per month (small apartment).
- Groceries for a month cost around $880.
- Internet is $95 and the phone bill is somewhere around $65 which makes $160 per month.
- Transportation can cost between $83 to $143 depending on which city you’re residing in.
- On average, we spend $403 on health care costs per month.
- We spend about $208 on entertainment every month.
These costs are some of the most basic necessities that a family needs to lead a good life.
Saving money can be difficult but it is not entirely impossible. There are plenty of ways that can aid you in saving money and making it easier to manage monthly finances.
Why Saving Money Is Important?
The need to save money is pretty obvious. Yet, many of us neglect it because we either get tempted or do not follow the rules.
If you need motivation, check out these reasons to save money:
Peace of Mind
Four out of ten people are said to be worried due to a lack of funds. Moreover, a similar number of people find it difficult to sleep at night because they are worried about paying bills and achieving their dreams. Even those with a good job often worry about money because you can’t be sure for how long you’d continue to make the kind of money you’re making today.
The only way to get rid of all these worries is to live within your means, save more, and take steps to increase your income.
Think about how easy life would be if you could save enough money to pay for your child’s college, this year’s rent, and next month’s utilities. Plus, with enough savings, you’ll be able to retire in peace.
You’ll Be Happier
Money might not be the answer to all the questions but we need it to be happy in today’s world. Money gives people assurance and security and puts them in a position to live life the way they want to.
It’s not only about luxuries, it’s about being in a position where you can enjoy the little moments of your life without worrying about tomorrow.
According to reports, financial trouble is one of the major reasons why couples quarrel and divorce. Plus, it can even lead to depression and low self-esteem. All these things combined can make it difficult for people to be happy.
Saving money will make you less stressed which will make you more productive as well.
Money Will Make You More Money
The sad truth is that we need money to make money. Nobody gets rich by saving money. You will need to increase your income to be able to turn the tables.
There are several ways to earn money but most require capital. This is why it is important to save money so you can invest it. The only other option is to apply for a loan, which may work but may not be the best option since you will have to pay interest on the loan. This will not only reduce your profit but also burden you.
We suggest that you stay away from debt altogether and concentrate on earning and saving money instead.
Even if you do not invest your money, you will most probably keep it in a safe place, such as a savings account, which will earn you about 1% to 3% interest per year.
Will Allow You To Get Rid of Debt
The more money you save, the fewer loans you’ll need. Plus, you’ll find it easier to get rid of your debt with your savings. This will not only strengthen your financial position and have a positive impact on your credit score but also safeguard your future.
You will not have to worry about making timely payments or losing your house or paying extra charges.
All in all, it can be concluded that we need money to stay debt-free, happy, wealthy, and at peace.
How Much Money to Save
According to the 50/30/20 rule, you should save about 20 percent of your income, spend 50 percent of it on necessities, and the remaining 30 percent on discretionary items.
But, when to avoid saving? Most financial experts agree to have at least four months of salary in your emergency funds. This means, if you make $3,000 per month, your emergency fund should contain at least $12,000.
We understand it may be a huge amount for most people, but you have to start somewhere. The most important rule is to:
- Only turn to your emergency fund when you’re in a real emergency. A vacation, for example, is not an emergency but a house renovation may be.
- Reimburse the amount you take as quickly as possible.
- Change the amount with the changing scenario. For example, if your income goes to $4,000, then you will have to save 20% of it per month, which equals to $800.
- Put your money in an account that is liquid and easy to access. Fixed-term deposits, for example, may not be suitable since you will have to pay a fee if you ever withdraw the sum before the due date.
Do not worry if you cannot afford to save 20 percent. The idea is to do your best and grow the habit of saving. You can start with 10 percent or even lower and move up gradually.
What To Do After You Have Saved Enough Money?
Let’s say you have saved $12,000 in your account. Now, you can do one of the following:
- Continue to add 20 percent to your emergency fund.
- Add 10 percent to savings fund and invest the remaining 10 percent elsewhere.
- Invest a sum from your savings if you have a good opportunity and continue to reimburse every month. However, make sure to calculate how much money you may need in the future before you take out a big chunk from your savings account.
- Continue to add more funds to your savings account, especially if it’s giving you good returns.
- Open another savings account with specific intentions, such as the intention to invest or travel with family.
Our Favorite Saving Money Hacks
Saving money can be difficult but it is not entirely impossible. There are a plethora of ways that can aid you in saving money and making it easier to manage monthly finances.
Remember that when it comes to money, every cent counts. Saving $3 per day may not sound much but it’s a lot when you look at the monthly figure. You will be left with $90 per month, which is more than the average monthly cell phone bill. This means saving $3 per day will make it easier for you to pay your phone bills.
But, how can you save $3 and more per day? Here are some tips to save money:
1. Preparing The Grocery List And Sticking To It
Shopping without a grocery list often causes people to end up making impulse purchases. This raises the monthly grocery budget and disrupts other categories (if you have made a monthly budget sheet).
Apart from that, it can also result in a lot of wastage as most edible items come with an expiry date.
The wise thing to do is to prepare a grocery list and include items that are preferred by the family members. Only buy what you need, even if there are items on sale.
2. Negotiate On The Credit Card Rates
Several hundreds of your hard earned dollars burn in the form of interest rate and just vanish from your account. You can make huge savings on a monthly basis by reducing this amount.
Call your credit card company and negotiate a new deal. Even a small reduction in the interest rate can do wonders.
Most credit companies look into the borrower’s financial history when making such decisions. If you have been paying the interest on time then there’s a huge chance that the negotiation might go successful.
You can also consider moving to another provider if your current provider is not willing to listen to your request. However, make sure to consider the cost of the transfer.
3. Complete Transfer Of Balance
Did you know that about 19% to 30% of your money goes into interest rates? This is a huge amount of money that’s eradicated from your account just for borrowing money on the card.
If you are paying a huge APR on your credit card then it’s about time to play smart. You can do a complete transfer of balance and switch to a new credit card company. One that has less APR or no APR at all. That’s right, some companies offer credit cards at 0% APR.
4. Install LEDs Where Applicable
This is the era of technological advancements and one such invention is the LED. It consumes less power, lasts longer, and offers a better experience. If you have CFL or another lighting in your home then it’s time to go for a replacement.
This is because the average runtime of a CFL bulb is 10,000 hours while LED bulbs last for 50,000 hours easily.
Moreover, LEDs save 10 times more power. The power saving ability of CFLs is 75% while LEDs save up to 85% of energy. All in all, you will not only get reduced bill when you opt for LEDs but you’d also save money as they require fewer replacements.
5. Control Heating Appliances
Canada is among the coldest regions in the world. We can’t live without a proper HVAC system in place. The average Toronto resident receives a monthly energy bill of $200 and about 40% of this is heating cost.
You need to take steps to reduce the amount. The best option is to get a heater that has a programmable thermostat installed in it so that the temperature can be adjusted.
Here are a few more tips to help you bring down the energy bill:
- Operate the heater at 19 – 21 degrees only.
- Use the timer switch on the heater and schedule it to turn off after a few hours.
- Service the boiler every day as it can reduce 10% of your energy bill.
- The pipes that make their way from the heater into various rooms should have proper insulation so that heat cannot escape.
- Carefully insulate the room and make sure there are no leaks.
6. Limiting Energy Consumption By an Air Conditioner
ACs contribute around $111 to your monthly bill for a single unit. Again, an AC with a programmable thermostat will help lower the bill by a great deal.
One thing that most homeowners tend to neglect is the maintenance of the unit. Dirty filters can cause the appliance to consume more power in order to give the desired output. Therefore, keeping the filters clean and well maintained should be a high priority task and must be done every month.
Cleaning the filters on a monthly basis will bring the energy bill down between 5% to 15%.
7. Install A Platinum Film For Summers
The atrocities of UV rays can be deadly. Constant exposure to UV rays can cause cancer, skin damage, cataracts, poor immune system, etc.
This means that the chances of falling ill get higher and so does the healthcare bill.
We spend about $2,000 on health, however, taking precautions such as installing a platinum film can help avoid illnesses since it does not let UV rays penetrate into the house.
8. Follow The 50/20/30 Rule
One of the best ways to save money is to adapt to the 50/20/30 rule. This rule says to::
- Spend 50% of your income on important expenses such as rent, utility bills, transportation, food, health, etc.
- Spend 20% of income on clearing debt saving. It is important to have an emergency fund so that you do not get into a financial crunch in case you have an emergency bill to take care of.
- Spend the remaining 30% of your income son living and lifestyle expenses such as dine outs, movies, new clothes, renovations, etc.
9. Using The Credit Card Smartly
It can be difficult to ditch your credit card in today’s time when everything has gone digital. With a single swipe of the card, payments are made which is quite convenient. However, it accompanies with a huge risk of debt.
The average Canadian has about $2,627 debt on a credit card which is alarming. Now, the only way to steer clear of debt is to pay on time and don’t let the debt pile on.
Moreover, there are a few ways that can help you save money on your credit card, such as:
A Cash Back Credit Card: You can collect cash rewards on specific credit cards. At most, a credit card with cash back rewards will offer 1% rewards on a certain amount.
If you can manage to spend $3,000 from your credit card then you can earn $360 in a year. It’s not much but it can make a difference at the end of the day.
Credit Card That Offers Sign Up Bonus: Some credit cards offer amazing sign up bonuses due to the fierce competition among the credit card companies.
The bonuses include free hotel stays, airline ticket discounts, discount on food and clothing, and cash backs.
To avail sign up bonuses, choose a company that offers them. Make sure to hit the eligibility meter to ensure you can enjoy these rewards.
0% Foreign Transaction Fee: Most credit cards add 3% fee when using your card abroad. If you travel a lot then this 3% fee can multiply and cost you a lot.
The solution to this problem lies in opting for a credit card that offers a 0% transaction fee on foreign purchases. Opting for a prepaid card may also be a good option.
10. Price Comparison Will Save You Money
Many of us are habitual of buying from the very first store we walk into. It’s true that time is money but only when you utilize it time wisely.
If you’re a busy person who finds it hard to spend extra time and survey multiple shops or websites before making a purchase then you can appoint a family member or your spouse to do so.
Ask them to compare different products and offers before picking one. This can be made easier now thanks to online comparison sites that can do all the hard work for you.
Apply this rule to everything from big budget items such as airplane tickets to small items such as groceries and clothes. Moreover, you should also compare services and unique products including insurance plans.
11. Limit Dine Outs
It is important to dine out together and relax but you need to stick to a budget and control how much you spend on such activities.
The average amount of breakfast for a single person in Canada is $10, decent lunch costs around $14, and dinner can be about $20.
This means that dining out with a family of four can easily cost you between $50-$100. This is the cost of a single dine out.
On average, a Canadian family goes out at least twice a month to eat out. It can cost you about $200 per month. Moreover, people often go overboard and end up spending more.
You need to be clever when it comes to such activities.
- Make your own food and go out to enjoy with each other. You can go to a nearby park or other such location to have a small picnic.
- Use the envelope system when you go out to eat. This includes only carrying the amount you want to spend on eating out so that you do not go out of budget.
12. Switch To Fuel Efficient Vehicles
If you have a car that offers poor mileage then it’s costing you extra money. Suppose, you drive a vehicle for about 80,000 miles. Now, if we compare a car that gives 25 miles per gallon to a car that offers 15 miles per gallon, that saves you more than 2133 gallons straightaway.
In Canada, the average gas price is $1.30 which means that with a fuel efficient car you’d be saving $2,773.
13. Put Up Unused Space For Rent
Utilize every corner of your home, from the porch to your basement to empty rooms. You can use services like Airbnb to find people to stay at your place. It can be a fun and easy way to make money.
Moreover, there are websites where you can rent out your basement. Companies and individuals are often on a lookout for spaces to keep their goods. It can be a nice way to make some quick cash.
14. Get Rid of Your Debt on Time
Stay away from debt and if you are already under debt then make sure to get rid of it as soon as possible. Debt can pile on quickly and can put you in a financial mess if you do not take care of it.
You can use a variety of methods to get rid of debt including debt consolidation and snowballing.
15. Cut Off Subscriptions
Have you subscribed to a bunch of services you do not use anymore? Many of us sign up for services without realizing the web of recurring payments. $10 might not sound much but it can cost you $120 for the whole year.
Have a look at your credit card bill and identify charges you do not recognize. Another good option is to use a reliable app like Truebill. It can manage your subscriptions and optimize your spendings.
16. Take The DIY Approach Whenever Possible
This is the era of taking matters in your own hands. Why spend money on carpenters or plumbers when you can do things on your own.
You can check online reviews and guides to know more about how to pull off a task. However, remember that some jobs can be risky. Only take on what you can handle.
Also, you may have to spend a little on tools and equipment as some jobs require specialized tools. Consider this investment if it actually helps you save money in the long-run.
17. Make a Budget and Stick to It
The best and most efficient way to save money is to make a budget and take steps to stick to it. Know how much you can afford to spend and how much you need to save so that you never go overboard.
Check out our guide on how to make a killer budget.
18. Grow Your Own Food
Gardening can save you up to $600 and if you have the space, you can grow more food and even make money by selling it.
There are many advantages of growing your own food. You will not only save money on food, but also get access to fresh produce that are said to be more healthy and nutritious when compared to grocery items.
Plus, since organic food is healthy, you will get to save money you’d otherwise spend on healthcare.
19. Buy Used Items
Consider investing in used items to save money. You can save up to 40% by opting for used electronics. Also, consider renting instead of buying.
You can buy used items through a variety of options including thrift stores and online sites such as Amazon and eBay. However, it’s important to be careful when purchasing used items.
Always inspect the items carefully and ask for at least a short-term warranty.
20. Buy Insurance
Insurance is an expense but it can help you save money, if done right. Get in touch with an expert and know how insurance can help you reduce expenses.
You can get everything insured from your life to your children’s future to your vehicle.
21. Shop At the Right Time
Companies offer discounts during Christmas and other such occasions. It can be a good time to shop what you need as you will be able to get goods at a discounted rate.
Plus, make good use of sales and discounts. Moreover, keep an eye on vouchers and special deals. You can save a good amount of money just be being careful about when to buy a specific product.
These are some of the best ways to save money. The key lies in being careful and making a plan so that you do not end up spending more than what you need to spend.
We hope these tips will help you save money. The key lies in keeping an eye on your expenditure and getting rid of all the unnecessary expenses. You may find it a little difficult in the beginning but once you begin to see the benefits of saving money, you’ll get the motivation to do so.
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Moe is a fun loving guy with a degree in business. He uses his secrets to make and save money and likes to workout, travel, and read in his free time.