Non-conventional forms of saving

You decide to peruse through the mall and promise yourself that you are only going to window shop but then a leather jacket in the store window catches your eye. It looks similar to the jacket you liked on Instagram last week. It’s $250 but tell to yourself that you’re not buying lunches for a week to make up for the jacket. The credit card bill comes up and you’re shocked at how much you’ve spent this month. Those daily coffees, lunches, social gatherings at that new trendy restaurant you saw on Yelp on top of your monthly utility, phone and cable bill have added up. Suddenly, purchasing that leather jacket does not seem like a good decision.

Don’t beat yourself up. You’re not alone. According to Statistics Canada, in 2009, the average household in Canada spent $71,120 yearly. On average, almost 52 per cent went to food, shelter and clothing. While the necessities are accounted for, the other 48 per cent can be saved!


Typically, when one thinks of saving, one thinks of more traditional methods such as bonds, mutual funds and stocks. While these traditional ways are effective, here are some non-traditional ideas that may help you save those extra dollars.

  1. It’s time to axe your cable. I know it sounds crazy but hear me out. With the efficiency of technology, you can now hook up your TV to the internet and watch whatever you want, whenever! With services like Netflix, CraveTV and Amazon Prime, you can watch movies and TV shows at a much lower cost. According to a study by market research firm NPD Group, cable bills will soon grow to an average of $123 per month, or $1,476 per year. Sorry telecom companies, but people are taking their money back!
  2. Share your accounts. Did you know that Netflix, Apple Music and many gyms offer shared memberships? Sharing your accounts with friends and family will allow you to continue the lifestyle you have without spending an astronomical amount each month. Sharing is caring – your wallet needs some loving too!
  3. Did you know there are a ton of money management apps that are user-friendly and easy to adopt into your daily lives? Apps like Mint, Goodbudget and Mvelopes will help you track daily expenses and calculate the amount you would need to save to stay within budget. Seeing those numbers will help you monitor and alter your spending habits as you go. Many of these apps are also free!
  4. In addition to money management apps, there are also discount/coupon apps that will help you find great deals on groceries, furniture and much more! Apps like Snap by Groupon, Checkout 51 and Zweet have filter options, including distance, store preference and deals-of-the-day/week.
  5. Do you often find yourself justifying your actions and spending because of “FOMO (Fear Of Missing Out)” and “YOLO (You Only Live Once)”? Here’s a suggestion – limit your time on social media sites. When you see photos of your friends on vacation, an OOTD (outfit of the day), parties, you will find yourself suddenly wanting things you didn’t think you wanted before! Chances are that you don’t really need these items. As the saying goes, “out of sight, out of mind!”
  6. Finally, evaluate your expenses at the end of each week – update, review and adjust your budget and accounts accordingly. Track your progress against your financial goals and the previous weeks. Once you get into this habit and start to notice how much you’re saving, you’ll feel a great sense of satisfaction! Saving doesn’t have to be a chore! Humans are creatures of habit and your future self will thank you!

 

 

V. Pang | DBPC Blog

Best saving strategies for the golden days

At 5:30 am, the alarm shrieks a-ring, ring, ring — the death knell of sleep — and I spring out of bed mentally listing out my to-dos for the day. As I sip a hot cup of coffee, the vision of a myself lounging on a Muskoka chair by a lakeside cottage galvanizes me to perform optimally at work and thereby save crucial dollars for my retirement.

However, before saying sayonara to full-time work, you must ensure sufficient income for the autumn of life, which might be anywhere from 20 to 30 years! This requires careful planning. With the following strategies, your lakeside cottage may have to find space for a sleek boat!

 

Saving schemes:

Registered Retirement Savings Plan (RRSP)s encourage Canadians to save for retirement by offering tax benefits, which are twofold — contributions to RRSPs are tax deductible and the money compounds sans tax till you withdraw it. You can also open a Tax-Free Savings Account that allows your savings to grow tax-free.

Old Age Security:

Canadian citizens and permanent residents who have lived in Canada for more than 10 years after the age of 18 will be eligible for Old Age Security when they turn 65. The amount is not tied to your contributions but depends on the length of your stay in Canada.

Canada Pension Plan:

CPP is designed to replace approximately 25% of your earnings. Canadians earning $35,000 or more annually and who are over the age of 18 must pay into the CPP. The contribution rate is 9.9%, which is split equally between you and your employer. If you are self-employed, you pay the full amount. Your CPP benefit amount depends on the length of time and the amount you contributed and the age you choose to begin receiving your pension — you can start at any time between the ages of 60 and 70.

Employer pension plans:

Some Canadians will also receive benefits from employer-sponsored pension plans like Defined Benefit Pension Plan (DBP) and Defined Contribution Pension Plan (DCP). In a DCP, you and your employer contribute an established amount annually. You must choose how your contributions are invested. The amount of retirement income is not guaranteed because it’s market-dependent. DBPs are an agreement where the employer promises to pay a certain amount of money each year after retirement. You run the risk of that fund not being managed properly or your employer experiencing financial troubles, even bankruptcy.

All the above benefits will only cover a portion of your income requirement-post retirement. The reality is that only two out of five Canadians are covered by workplace pension plans and the pension provided by government won’t be enough to get by — In 2015, the maximum payout for CPP was only $12,780 per year.

Start early:

To ensure you have enough income to last throughout your retirement, you need to start saving early. In the 2016 Sun Life Retirement Now report, 89% of the surveyed ranked starting to save and invest early as their number one tip. When you factor in wildcards like medical emergencies and children who need long-term support, you will need 70% of your working income when you reach retirement. This is not an unattainable target when you adopt these methods.

Pay yourself first:

This simple technique, made famous by David Chilton in The Wealthy Barber, makes saving easy. Figure out how much you want to save, set-up an automatic withdrawal plan with your bank for that amount and spend the rest.

Bank tax returns:

An easy way to boost retirement funds is to increase the amount of tax refunds saved. Also, save at least half of any pay increase you receive. When you receive another raise, keep saving the earlier amount as well as half of the new increase.

Practice premeditation:

Put a brake on impulse purchases. Refuse to buy anything over $100 on the spot. Force yourself to think about it for at least a day. Also, comparison shop online for better deals.

Prepare for retirement:

Try living on your projected retirement income before quitting to see if it meets your expectations. Adjust your retirement plan accordingly.

 

 

N. Caleb | DBPC Blog