In today’s world, the pressure to spend can be overwhelming. But saving money, even if you don’t have much of it, is key to your short- and long-term financial well-being.
Here are some tips to help you get started.
1. Be proactive. “Make saving a habit, even if you don’t have or make much money,” says Chartered Accountant Danielle Sideris, Senior Manager, National Tax with BDO Canada in Toronto. “You should have funds set aside in case you find yourself in an emergency financial situation, due to a change in your employment status or if a health issue arises.”
2. Start small. “No matter how much or little you save, success breeds success,” says Chartered Accountant Andrew Sanderson, a partner with Morley, Sanderson, Millard & Foster in Aurora, Ontario. “Set a reasonable, obtainable objective so success is assured. It’s like a diet; it is always motivating to see results.”
3. Establish a budget. “Setting a budget is critical, to ensure you can meet your ongoing financial obligations and help you determine how much is a reasonable amount to set aside for your savings,” says Sideris. Adds Sanderson: “The biggest mistake people make, no matter how much money they make, is not having a plan. Plans don’t have to be elaborate, there just has to be a starting point.”
4. Live within your means. “Life is a long journey, and expensive cars, boats and vacations should be put off until they are easily afforded,” advises Sanderson. “In early life, embrace the term ‘economical’.”
5. Cut discretionary costs. “Determine where you can reduce unnecessary expenses,” says Sideris. “Bringing your morning coffee or lunch from home can save you money in the long run.”
6. Use cash. “If easily available credit (such as credit cards) is a danger to your savings goals, then spend cash,” advises Sanderson. “If you do use a credit card, pay it off each month.”
7. Make saving automatic. “Set up an automatic withdrawal from your chequing account to be deposited to your savings account,” suggests Sanderson “You can also set up a regular payroll deduction with your employer to save funds directly to your Registered Retirement Savings Plan (RRSP),” says Sideris. “This provides a disciplined savings program for your retirement and will also reduce tax withholdings at source and increase cash flow.”
8. Select a savings vehicle that meets your needs. “The choice between a Tax Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) depends on your level of income,” says Sanderson. “In retirement, RRSPs are taxable and may erode other credits available to low-income retirees, but drawing funds from a TFSA does not have this effect.” If you have children, Sideris suggests a Registered Education Savings Plan (RESP), which allows you to accumulate savings on a tax-deferred basis while taking advantage of education savings grants provided by the federal government.
Posted: Sep 30, 2015
– Courtesy: The Institute of Chartered Accountants of Ontario