Budgeting
Set up a budget. "A lot of people see a budget as something they are tied to; that’s going to restrict their spending. It’s not that way at all. It’s a tool to help you make decisions," explains Lynn Biscott, president of Fernwood Consulting Group Inc., a financial education and communications company in Toronto. First determine your monthly net income. Then figure out your expenses. Determine how much you'd like to put aside for savings (RRSP contributions), and create a budget template with appropriate categories.
Track your expenses. Use financial software, such as Quicken, or free online budget templates to track your spending. Get a receipt when you pay cash for an item, so you can track it. Enter your expenses weekly so you can see when you are getting close to your limit.
Take it to the next level. Do you have a specific goal you want to reach, such as taking a vacation? Determine how much money you need, and work it into your budget as a savings item, creating a realistic time line for the goal. Tip: Putting aside just $20 a week will add up to $1,040 in a year.
Savings Strategies
Build an emergency fund. This isn't only for big contingencies, such as job loss, but it's also for unexpected expenses, such as a car repair. Try to accumulate three to six months of living expenses, Biscott advises, and put your money in a premium savings account that pays higher interest rates. ING Direct and President's Choice Financial are both currently at three per cent.
Increase your savings. Open a savings account and deposit your paycheque there. Transfer what you need to live on to your chequing account and leave the rest in the savings account, where it will earn higher interest. When you get a raise or a larger paycheque, keep the extra in the savings account.
Use the right account. Use a chequing account for day-to-day transactions and a savings account for savings. A savings account pays a higher rate of interest, and while some allow you to write cheques, they generally charge high fees to do so.
Minimize ABM fees. Banks typically charge $1.50 per transaction at the bank machine. Minimize your ABM fees by purchasing a monthly service package ($4 to $25) that includes either a set number, or an unlimited amount, of transactions. The Financial Consumer Agency of Canada has an online Banking Package Selection Tool where you can find the best package for you. Some packages will waive the fees if you keep a minimum balance in your account. If you're paying for transactions, take advantage of retailers – such as Wal-Mart and Loblaws – that offer cashback upon purchase, so you can reduce your trips to the ABM. Also avoid using other institutions' ABMs because the cost per transaction can jump to $3.
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