The best way to save more is to reduce your lifestyle to direct more money towards your investments.
Easier said than done? Not necessarily, because the key is to bet on small amounts, which make a huge difference.
For example, a daily mocha coffee at Tim’s or Starbucks costs around $4, or $80 per month, or $960 per year. If your marginal tax rate is 30%, that represents $1,248; at $15 an hour, that’s 8 days of work. You might as well buy a thermos and a coffee machine at Canadian Tire (between $70 and $200, depending on capacity).
Concretely, these “small expenses that don’t hurt” directly affect your ability to not spend your retirement watching Netflix, or buying the house of your dreams.
The next step is to channel these small amounts by setting up an automatic transfer to your RRSP or TFSA (or both) on your payday.
For example, a weekly transfer of $20 will earn $72,333.93 over 30 years taking into account compound interest and an average return of 5%. Another, of $100, will result in a war chest of $361,669.65 after three decades.
Effective ways
No need to cut back on all our little pleasures to save thousands of dollars. For example, you must review your insurance needs as soon as your life changes: birth, new spouse, separation, return to school, purchase of a house, higher education of your children, major trips, promotion, etc.
Do your wash in cold water and save 18 times the cost of hot water washes! Take your foot off the highway: at less than 100 km/h, you refuel less often. Change your mobile plan based on your actual data usage. Buy used outdoor gear, especially for children. Take advantage of free or inexpensive cultural outings offered by your municipality. Pack your lunches and save at least $1,500 per year.
At the grocery store:
- buy house brands and large formats;
- make a list and have a snack before placing your order;
- look at the products on the upper and lower shelves, where it is cheaper;
- replace meat with fish, poultry and legumes at least once or twice a week.
Finally, make the accelerated mortgage payments your contract allows. For example, an additional annual payment of $2,000 on a $300,000 mortgage, at a fixed rate of 5% amortized over 25 years, results in interest savings of $41,252.
Advice:
- Sell your junk. A fortune is hidden in your cupboards or garage. If it hasn’t been used in a year, offer the item on Kijiji, Marketplace or eBay. We are talking here about hundreds and even thousands of dollars which will directly enrich your war chest.
- Do you have a room that is rarely or never used? Praise her! That’s a few hundred dollars per month that finances your home, your vacations, your children’s return to school and your retirement dreams.
- Do you telework three or four days out of five? Is the second car necessary? Sell it and add $100,000 to your savings over 10 years (the average cost of a vehicle established by CAA exceeds this amount).
- Shop your insurer or mortgage lender at renewal. You will save thousands of dollars which will enrich your RRSP and your TFSA.
- Contribute to a Registered Education Savings Plan (RESP) for your children and benefit from grants: it’s money that falls from the sky.