Tips to help ensure your New Year’s resolution to save more money sticks.
As New Year’s resolutions go, one of the most popular is to spend less and save more money, and it’s popular for a reason. We could all use a little more money to help with paying down debt or saving up for a new car, house, vacation, or retirement. The problem with New Year’s resolutions however, is that sometimes they’re tricky to keep. In January and February, everyone starts out strong but after a few months we go back to our old ways.
Let’s try to change that this time around with an approach that will hopefully keep the momentum going all year long.
For the first two months, track your spending.
Do you know how much money you spend a month on groceries? Transportation (including things like fuel, parking, and auto insurance)? Clothing? Nights out with friends? Your pets? In order to save money, you need to know where you’re spending it, so for the first month or two keep tabs (and receipts) on everything you spend your money on.
Create a budget. It’s good for your bank account.
Once you’ve got a handle on where you’re spending your money, it’s time to build out your spending and savings plan (sounds better than budget, doesn’t it?) By regularly tracking the money you’ve got coming in and where it’s being spent, you’ll have a roadmap that will guide you in your efforts. It will help you prioritize where your money goes by putting a dollar figure next to everything you’re spending your money on so you can decide if it’s worth the purchase. And, it works. According to the Financial Consumer Agency of Canada (FCAC), the vast majority (93 per cent) of Canadians who have a spending and savings plan tend to stay within it.
The FCAC’s budget calculator is resource that I’ve found helpful in building out my own budget.
Establish S.M.A.R.T. financial goals
It’s too easy to lose sight of your savings resolution if you don’t map out a plan that details what you want to do, how you plan to do it, and when you plan to do it by. That’s where S.M.A.R.T. goals come in. S.M.A.R.T. goals are specific, measurable, attainable, reasonable, and timely.
For example, instead of saying, “I want to save more money”—which is vague—instead go with something like: I want to set aside 5 per cent of each paycheque for the rest of the year to build up an emergency fund so that if my car breaks down I won’t have to rely on my credit cards to pay for the repairs. I will transfer this amount into a new savings account so that I can track my progress.
Revisit your budget regularly
It’s important to regularly check in and review your budget as few components of your budget are set in stone. You may get a raise, your expenses may increase or you may have reached your goal and want to plan for a new one. Your budget will change as your life changes, and it’s important to check in to make sure you’re still on track.
Kick start your savings today
Saving money is a marathon, not a sprint, but there are a couple of ways Rates.ca can help you kick start your savings plan today. Let’s start with the plastic in your wallet.
Does your credit card pay you? If it doesn't, perhaps it's time to consider a new credit card. If a card will give you cash back or help you spend less on items you'd buy anyway, perhaps that's a credit card that deserves a slot in your wallet.
Another potential quick win for savings is on your car insurance. Car insurance can account for a big chunk of your regular monthly expenses, and it's like any other product or service: to get the best deal, you have to shop around. Kick your high auto insurance rates to the curb and compare car insurance rates today for a better price.