It's Your Money  

Lazy guide to saving money

There are so many Canadians who are barely making ends meet and a recent study suggested 46% are within $200 of bankruptcy.

Everyone would like to save more money, but how can people save when they can’t even handle their debt situation?

Well, today, you’re in luck; I’m going to make it really easy for you to free up a little more cash at the end of each month. 

I have compiled a list of five easy, maybe even lazy ways that you can save significant money each month:

Eat your groceries

Canadian households waste more than 15 million pounds of food each year and that’s a whole lot of money getting thrown in the trash.

Take a moment to create a written inventory of what perishable food you have in your fridge and cupboard and brainstorm some ideas of meals that you can create with these items.

Share the list with family members to make sure the food is used up instead of thrown out. Average
savings = $70/month

Pay off your credit cards

Do you have an outstanding balance on a credit card that isn’t paid off in full at the end of each month?

If so, talk to your bank or credit union about transferring this debt to a line of credit or other loan that charges a lower interest rate.

If you can take $5,000 of credit card debt (at 20 per cent) and roll it over to a LOC at four per cent, your savings = $67/month    

Use the library

Do you ever pay for movies on demand or buy a book or magazine? You can access all of these items for free at your local library.

Take advantage of the library services in your town that you already pay for through your property taxes. If you avoid two movie rentals, one book and three magazine purchases it will save you $40/month

Become a better negotiator

Cell phone and TV/internet providers have a good thing going in Canada and they know it.

They also know that they really don’t want to lose customers (who are paying them far too much for the services they provide) to a competitor so they are willing to negotiate to keep you there.

Call your provider up and ask what kind of discounts they are willing to give you as a loyal customer. A quick 10 minute call to each provider could easily save you $50/month

Bring your lunch and coffee from home

Do you swing by Starbucks each morning for a $5 coffee? Go out for lunch every day for $10 or more?

This is still the easiest way to save money and trim your budget. Pack your lunch the night before or even pre-make a week’s worth of lunches on Sunday.

If you were to skip the morning coffee drive through and brown bag it two more days per week you’d save $45/month

Did you make it all the way to the bottom of my list? If so, congratulations!

Now, for your homework – print off this list and stick it on your fridge. Your goal is to check off at least three of my five suggestions in the next week.

That’s it; freeing up some extra cash flow really can be easy.     

Finally, what should you do with all of the extra money you now have? Before you run out and spend it, create a simple plan to put yourself in a better financial position down the road.

Use the extra money to pay off some debt or put it in a TFSA or RRSP account to help build your retirement nest egg. 

Taking control of your finances doesn’t have to be intimidating or even time consuming but I promise the efforts you put in today will be well worth it.

Making your savings last

Most people spend several decades slowly saving up enough to retire on.

Once you get there, the focus shifts to ensuring that you won’t run out of money too soon, and maybe even leaving something behind for your family.

The key to ensuring your funds won’t run out is to have a solid financial plan that includes strategies to help make your money last longer. So, what kind of strategies should you be considering? 

Maximize government programs

Most of you will qualify for some type of benefits (reimbursements) but there are decisions that need to be made. Typically, most people are better off taking CPP early unless you’re still working. OAS clawback can often be avoided and even the GIS supplement can be within reach for some that aren’t receiving it now.

The earlier you structure your retirement income plans, the better chance you have to maximize what you’re able to pull out of these programs.

Consider pension splitting

For couples that have a gap between their retirement income amounts, pension income splitting can help reduce taxes and increase government program payments.

You are permitted to split up to 50% of most types of “pension like” income including RRIFs, annuities and other qualifying payments. You cannot however split CPP and OAS payments.

Make tax efficient withdrawals

Everyone’s situation is different here which further highlights why a tailored financial plan is so important. For some, drawing down on non-registered savings will allow their more tax-efficient accounts like RRSPs and TFSAs to grow longer. For others, drawing the RRSPs down early will allow them to qualify for full OAS or even the GIS supplement.

Retirees in a higher tax bracket may even use a “return of capital only” withdrawal plan for their non-registered savings. 

Gift money sooner

Plenty of retirement and estate plans have money set aside for gifting to children and/or charities. While most assume they’ll gift this money upon death, there could be a lot of benefits to doing so earlier on.

You want to make sure that giving these gifts now don’t put your own retirement in jeopardy and if not, that you’re doing them in the most tax-efficient way possible.

Don’t be afraid to use your home

Canadians will typically spend the majority of their working lives paying off their mortgage and once they’re finally debt free, are often very hesitant to use the equity in it for retirement purposes.

Accessing this equity might be best done through a home equity line of credit or selling the home to downsize or rent. Your home is an asset, just like money saved in your RRSP and it is important to look at it as such.

This year, most Canadians will spend more time planning their winter vacation than they will planning how to maximize their retirement savings.

It is never too early or too late to build your own custom retirement plan but I can promise that doing so today will be better than waiting till tomorrow.

Avoid holiday hangover

The holiday season is upon us and this means that many Canadians will end up spending more money over the next month than they normally do. 

 Presents for loved ones, travel to see family, time off work and special events all add up and take a real toll on your wallet or credit card.  

Canadian consumer debt is already at extreme levels and every dollar spent that could have instead gone to paying down your debt will cost you for the rest of your life. 

I am not saying that you can’t enjoy the holidays at all, but you do need to have a plan to avoid a holiday hangover in the New Year. 

Planning your holiday spending means not just budgeting for gifts but also the many other expenses that come with the holiday season.

To start, you need to be realistic with what you can afford and understand that you can’t afford to do everything. Once you’ve settled on an amount, here are a few steps you can take to stay on track:

Create a budget

Decide how much money you want to allocate to gifts, travel, entertainment and meals out. Once this budget has been created, stick to it.  

Build a gift list

Instead of walking into the mall without a plan, write down who you are planning to buy a gift for and then spend some time thinking of ideas of what that person would like. It’s not the price of the gift that counts for most people but instead the meaningfulness.

Some extra time spent thinking up a great idea could keep you from overspending. 

No impulsive buys

If you haven’t planned to buy it on your list, do you really need it? Even if it’s a “great deal”, there is no problem passing on it. If you’re not 100 per cent sure, sleep on it and go back the next day to make the purchase if you still think you should. 

Fewer toys for your kids

This is probably the hardest tip to stick to but it’s important. Many toys that are purchased each December quickly end up in the back of a closet or the bottom of a toy chest. Plus, many children are going to get gifts from grandparents and other family members on top of what you buy for them.

When the excitement of Christmas morning is over, they really won’t notice if they ended up with five new toys or 10. 

Don’t cave to peer pressure

Most commonly found at work, peer pressure can cause many to spend far more than they planned. If you have 25 co-workers, there is no reason why you should be buying a gift for each one.
If everyone else at the office does and you don’t want to be the sole cheapskate, consider making something at home that is personalized with meaning. 

Be selective in holiday events

While it’s nice to try and attend every lunch, dinner and party, doing so may not fit into your budget. Consider if you’ll be seeing the same group of friends at more than one event and pick which one you’d like to attend the most.

It’s not just the cost of the food but also things like babysitters, taxi rides home and gifts for the host that pile up. 

Plan now for next year

Once the holiday season is over, consider setting up a holiday fund for next year as one of your New Year’s resolutions. By putting a little bit aside each paycheque throughout the year, your budget won’t have the massive financial hit when the holidays arrive. 

The holidays are a celebration and you can and should enjoy quality with family and friends. But a little bit of planning can go along way to ensure that you can do all of that without starting next year with an ugly financial hangover. 


A living financial plan

Today is the first day of Financial Planning Week (FPW), in its 11th year, across Canada.

Since FPW is an integral part of national Financial Literacy Month, it is a good time to remind everyone, regardless of what stage of life, of the importance of building a financial plan.    

What is a real financial plan?

It is not a quarterly statement that shows how your investment portfolio is performing nor is it a one page document with some basic plans for how to draw out your retirement income.

A real financial plan is a living document that shows where you are today, where you’d like to be in the future and details exactly how you will get there.

In addition, a living plan is one that is regularly updated to account for all of the changes that occur in the markets and your own life.

The goals of FPW are to raise awareness of the importance of proper financial planning and to provoke a call to action from both the financial industry and consumers alike.

Repeated research studies have shown that Canadians who engage in comprehensive financial planning report significantly higher levels of financial and emotional well-being.

They are more confident in their ability to handle the inevitable bumps in life and are better equipped to achieving their goals. Most importantly, they report lower overall stress.

The results from one of these recent of these studies serve as a firm reminder of the importance of getting professional help:

  • 79% of Canadians don’t have strong confidence that they will achieve their financial life goals.
  • Only 18% strongly agree that they are knowledgeable about financial matters.
  • A mere 20% strongly agree that they’re successful in sticking to the financial strategies they do have in place.
  • 68% of Canadians say that they worry a lot about their financial situation.

Most Canadians don’t have a comprehensive financial plan in place and this is creating considerable (unnecessary) stress on many people. Whether you are in your early 20s or already retired, a sound financial plan can significantly improve your well being and your economic situation.    

Part of the focus of FPW is to help educate consumers on the differences of the quality of advice they receive and in particular, educate Canadians on the “Gold Standard” – the Certified Financial Planner (CFP) designation.

Unlike other designations, the CFP mark follows internationally recognized standards of knowledge, skills and abilities.

CFP professionals are ethically obligated to put their clients’ interests first and have completed a rigorous education program over four years, which includes two national exams.

To maintain their CFP designation, they must complete required professional education every year and continue to abide by the CFP code of conduct.          

A sound financial plan will help you make informed choices when faced with life’s inevitable changes. More importantly, many people say that a sound financial plan helps them get a good sleep at night.

If you haven’t done so already, consider this year’s Financial Planning Week as your call to action.

Make a plan to sit down with a Certified Financial Planner professional this week and get your own financial plan started!   

For more information: www.fpcanada.ca/FPW2019

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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and will take over as board chairman in June. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations for the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected].

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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