Saving For What Really Matters

Saving money is important. You don’t need us to tell you that. Whether you are saving for a new house, car, a dream vacation, retirement, or to send your kids off to college for the first time. Saving the money you make helps set you up for the future you want and the life that you want to lead. Yes, it can feel daunting, yes, it’s more fun to spend your money as you get it, but in the long run, you’ll be happy you saved for those things that really matter.

“Money can’t buy happiness!” A saying that you’ve heard so many times before. But do you believe it? We work all day to earn it, and when we’re constantly spending it, does it really feel good? Or does it stress us out more that we have less in our savings to put towards those important things? 

We’re not saying you can’t have fun and live the life you want to. However, you won’t regret saving for those big moments in life that mean the most. Before we get into our tips for saving, let’s talk a bit about the reasons we spend money

Fear of missing out (aka FOMO)

Do you suffer from FOMO? Don’t worry, it’s not just you. One of the biggest reasons that people overspend is that they feel like they’re missing out on the fun if they don’t. Who doesn’t want to travel the world or get the latest and greatest iPhone? Splurging here and there is one thing, but constantly going off budget can be troublesome. According to Tangerine bank, 26% of Canadians admitted to suffering from FOMO. Of that demographic, 48% are millennials, and only 9% is the baby boomer generation. The fear of missing out has been proven to have purchasing power over 25% of those surveyed. FOMO is a main motivator for consumers to shop and overspend. 

These alarming stats may come as a surprise, or you might completely agree that FOMO is affecting your spending habits. How do you counteract this? Here are some tips: 

  • Have a pot luck instead of eating out
  • Share appetizers at a new restaurant you want to try, versus going all out by ordering the most expensive dishes
  • Pre-drink before heading out so you don’t spend as much on drinks when out
  • Make a homemade meal or new recipe at home versus ordering take out/delivery 
  • Convince your friends to do cheaper things together versus buying tickets to expensive events, that way you won’t have FOMO of them going and you not
  • Remind yourself of the end goals you have for saving (Ex: that dream trip, that new car, etc.) 

The pressure from social media 

Social media has not helped us with FOMO. Especially when you see what everyone else is doing and posting about, and you feel a need to compete or show off the cool life you’re leading too. Wanting to do something or eat somewhere because you saw it on social media is one of the biggest reasons you’re overspending. But in the end – will spending money on those things really make you happy? Or just give you good Instagram content to post?  

Social media and the internet has become an endless resource for information, reviews, and the ability to buy whatever you want, whenever you want, by the click of a button. It’s great, but also can make it very easy for you to get into financial debt. According to Inc., nearly 40% of American adults with social media accounts say that seeing other people’s purchases and vacations have prompted them to look into similar purchases/vacays. As predicted, younger people are more likely to factor social media reactions into their purchasing decisions. Social media is used for many great things, but it shouldn’t be used to put yourself into debt just to fit in or get more “likes”.

Wants vs. needs

We often don’t see the difference between a financial want versus a financial need, and because of that, we are overspending. Financial wants are the items and things we desire. Whereas financial needs are financial obligations like bills, rent, debt, and anything else that life throws our way that we have to pay for. So how do you not go over budget so you don’t have the money for the needs in your life, but still have fun and be able to purchase the wants on occasion? Our favourite trick is to always keep track. It’s the best way to stay on budget, plus, it’ll help ensure you are living within your means and only spending money on your wants when you can afford to. Another tip is to really ask yourself if something is a need or want. Often we try and justify something as a need when really it’s a want. If you can live without it, it’s likely a want. 

Paying for convenience 

This is one of the most popular ways you are overspending. Spending on convenience means that you are paying more for something that is convenient even though there are cheaper options available. For example, buying pre-cut vegetables versus just buying them whole and cutting them yourself or picking up Starbucks every morning versus making your own coffee at home. These things can add up quickly, and are an easy way to save money that you can use towards other, more exciting things. 

Now that we talked about some of the reasons you’re spending all your money! Let’s talk about some of the ways you can save. 

A CIBC study in 2017 revealed that 85% of Canadians agreed that they needed to save more money, with 64% saying they lack a detailed or regular savings plan. Unfortunately they don’t teach us in school how to properly save, and because of it, many of us lack the financial literacy to make smart money decisions and create saving and spending habits that make sense. In turn, you end up needing to get an online payday loan online which is a responsible way to pay off an overdue bill, but what would be even better is if you can survive on your own income and not live outside of your own means. 

Here are some tips that can help you save

Know your income & spending 

The first step to creating a savings plan is to know how much you have coming in and out on a weekly, monthly, and annual basis. This is easy if you are someone who receives a regular, consistent paycheck. Take a look at past paydays and get a good idea of what you have coming in. When you know what you have coming in income-wise, figure out what you are spending. Taking a look at your bank statements, or using an app like Mint, can help you easily track where you are spending your money and what areas need improvement. 

Tweak your budget 

Once you know your income, and spending habits, tweak your budget to match and take note that this may change throughout the year based off new expenses, big events, or holidays. However, if you are following your budget and planning for these bigger events in advance, you should be able to save and not blow your budget when they approach. You should also ensure that you aren’t forgetting about your savings in this budget and letting them suffer.

Trim down

Coffee every morning? Eating out every day of the week? Shopping just because? These are easy places to cut back on your spending and save more. Take a hard look at where your money is going and again, reevaluate your needs versus wants. Can you live without your Starbucks every morning? Can you meal prep more at home so you eat out less? Ask yourself what some small changes you can make and then go from there. You’ll be surprised at how quickly you’ll be able to save. 

Force yourself to save

Treat your savings account like a bill and make sure that you are paying it each month so your savings increases and doesn’t get forgotten about. Set your account to auto withdrawal each payday so you don’t put off transferring that money into a savings account. Everyone can afford to save, even if it’s a little each month or week. Set goals for yourself of savings milestones you want to hit or things/items you are saving for. Don’t lose sight of these goals! 

Now don’t forget to ask yourself what you’re saving for. What is it that is a priority for you? Is it: 

  • Retirement
  • Kids college fund 
  • Post-secondary education for yourself 
  • A house 
  • A new car 
  • A dream vacay 
  • An emergency 

Then ask yourself if you can afford to be saving more than you’ve planned. In 2017, a study was conducted among 1,523 randomly selected Canadian adults where 85% of Canadian citizens agreed that they should be saving more money than what they were. So where do you start with calculating how much you could or should be saving? Here are some steps you can follow: 

Step One: Calculate Your After-Tax Income

Your after-tax income is what remains of your paycheck after taxes and deductions. This is easy to figure out if you get a regular paycheck or a salary. If you’re self-employed, this might look different, so take your gross income, minus your business expenses, and anything you put aside for your taxes.

Step Two: Limit Your Needs

Now go back to your budget, if you don’t have one, it’s time to create one! Take a look at how much you spend on your needs each month. Things to account for could be: 

  • Car insurance
  • Mortgage/rent
  • Utilities
  • Groceries
  • Other insurance like health or home
  • Regular medical expenses like prescriptions

Remember, only 50% of your income should fall towards your needs. If you’re over, take a look at what can be adjusted or where you can save costs. Maybe it’s calling your cell phone provider to see if you are paying for unused services, or looking for deals when shopping for groceries.

Step Three: Limit Your Wants

This is the easiest category to cut down on because you don’t need these things to survive. Don’t start going wild on manis and pedis, or booking that trip to Thailand if you don’t have the funds for it. Remember how strict we were in the “needs” category? Your “wants” are going to include the things that didn’t fall in there. For example: your Netflix subscription, home renos, etc. Only 30% of your income should fall towards your wants.

Step Four: Save 20%

Now the other 20% of your income can go towards your savings. This can include debt repayments outside your minimum payments (those fall under needs). This can also include additional car payments, payments to your credit card outside the minimum, etc. You can also allocate this to areas that you are planning to save like retirement, emergency fund, post-secondary education, and so on. 

20% is the estimated percentage that the average person will need to save in order to reach financial independence before you’re too old to enjoy it.

Saving money doesn’t have to feel daunting when you’re still making room for those wants and needs. It’s all about having a balance where you get to enjoy things in the now, but also be responsible for the things you need to pay for, and have savings for the things that really matter in life. 

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