Sometimes looking at the big final number is daunting, but breaking it down into smaller increments of weekly or monthly amounts over time makes saving money more manageable. Many do it, and so can you!!
Here are 12 steps to follow to start saving now:
1. Eliminate Debt: Calculate how much money you spend each month servicing your debts. Once this money is freed up, it is easy to move that money from debt servicing to savings. The additional benefit is that the sooner you pay off your debt, the less interest you will pay, and that money in turn can go towards savings.
2. Set Savings Goals: The minimum down payment required to purchase a home is 5%. Any down payment less than 20% requires mortgage insurance. Many strive to get to 20% so they don’t have to pay the extra in insurance, but there are also those who want to get their foot in the door before they get priced out of the market.
3. Establish a Time Frame: Set a realistic time frame for which you believe you will be able to achieve the goal. Example: I would like to purchase a home in 18 months.
4. Figure out how much you’ll have to save weekly, monthly, or per pay cheque: To keep on track it’s wise to aim for the same amount each week/month/pay cheque.
5. Track Your Expenses: This is an exercise you’ll be really glad you did, and you will be amazed at where your money goes. Two dollars here, five dollars there… it all adds up. When you write down where it goes, it’s easier to start pulling back in certain areas because you will be able to see it.
6. Cut Back: This is just trimming the fat. Cut back on unnecessary items. If you’re diligent at tracking, it will be evident where you can make those changes, in the least painful places. 1 less fast food meal, 2 less mocha choca-lotta lattes!!
7. Reassess Your Savings Goals: Net income minus mandatory expenses and those you absolutely cannot live without = A Number. Is that number in line with what you have set as your savings goal? If you’re netting $900/week and your savings goal is $300, you might have to readjust your time frame or the amount you’re taking from each pay cheque in order to make the goal attainable for you. Otherwise, you’ll get discouraged and quit, and then how are you going to get your houseJ
8. Create a Budget: Once you’ve balanced your income with your expenses and your savings, write down a budget so you’ll know each month, or each pay cheque how much you can spend on various things in each category. i.e. Entertainment =$150/mth
9. Hide Your Credit Cards: For a while, pay for EVERYTHING with cash. It is so much easier to lose track of your spending when you’re simply swiping. When you’re using cash, you’ll know when you’re running low and when to cut back, and will also make you more aware of what your limit is. If you have the discipline the pay your cards off every month, then having a credit card isn’t so bad, especially with the rewards that you can attain.
10. Open an Interest Bearing Savings Account
: Keep your savings separate from your spending money. The lines blur too easily. You can also get better interest rates on savings accounts as opposed to chequing.
11. Pay Yourself First: As difficult and as unrealistic as this sounds, do it. Usually people save whatever is left after everything else. If you pay yourself first, it’s funny how everything else will find a way to get paid. Don’t settle for what’s left, and make this a priority.
12. Be Persistent and Determined: Set up a plan and stick to it. Some tricks to help may be to set up automatic withdrawals from your pay cheque, or automatic transfers from chequing to savings.
Good things take time, but it will be worth it in the end. Good luck, and I look forward to helping you find that perfect first home.