The Importance of Savings
Posted by Gail | Filed under Saving
It’s an age-old story: People who save know how important it is to put away a little sumthin’ sumthin’ for the future. People who don’t save can come up with dozens of reasons why they can’t find the money. In the end, the savers plod along to a future brighter than being old and poor while those who don’t save constantly whine about their lot.
For those who are predisposed to saving – watching the money pile up is far more satisfying than buying another DVD or a 32nd pair of shoes – it’s easy to set aside money in their budgets for the future. But what if you’re a spender? What if the idea of saving money is so foreign that you sweep it away with another swipe of the debit card? You barely make enough to live. You’re in debt. You work hard and deserve nice things. There will be plenty of time to save in the future. Saving is what rich people do.
Consider this your swift kick in the butt: If you don’t start to save you’re headed for disaster. While you may want to spend every cent you make on stuff that makes you feel good, only irresponsible dopes actually act this way.
Saving is a habit and anyone can establish it. If you’re determined to be strong and take control of your financial future, you can take advantage of the habitual nature of saving and make it work for you. Commit to saving $20 a week and have the money automatically transferred to your RRSP, a TFSA an RESP or a high interest savings account. You can afford $20 a week, can’t you? Sure you can.
Don’t give up coffee completely. Just decide that you’re going to trim back your coffee habit by 25%, 30% or 50% a week and send all the money you’re not spending to your savings. If you’re serious about becoming a saver, it’s time to focus on making small, manageable changes that will stick.
Don’t say you’re not going to buy clothes; find a way to shop for way less, like hitting the second-hand store and becoming a bargain-hunter. Don’t give up reading, just give up buying books: head to the library for magazines, books, audiobooks, movies. Don’t give up eating out. Have a salad and dessert with your friends and skip the glass of wine.
Becoming financial responsible should not doom you to a life of boredom and denial. Small luxuries will still have their place. You’re just going to trim back and really appreciate them when they come along.
Money is an exhaustible resource. It runs out. If you want to have some for later, you’ve got to Not Spend some now. This is not about hoarding all your money and having no fun. It’s about taking small steps along the right path and setting a pace you can maintain. Most of all, it’s about getting started. It doesn’t matter how small your first step is. As long as you begin developing the saving habit, you’re heading in the right direction and momentum will carry you along.
September 24, 2012 at 6:39 am
If I’m not saving money I feel sick to my stomach.
September 24, 2012 at 6:43 am
If you have the option of saving through payroll deduction – take advantage of it. My company has the option of saving in retirement funds and non-registered accounts. I put 2% in my TFSA automatically. I find it much easier and more of a hands off way to save for emergencies.
I had to laugh this past week. I thought of a sweater I had rec’vd as a gift and thought “I wonder where that is?” – I completely forgot that I had put a number of fall/winter clothing away for the season. It’s like I have a whole new wardrobe! Remember to shop in your own closet – it’s easy to forget what you have. I try to buy clothes that are more classic pieces so I don’t get tired of them easily.
I also can’t say enough about making your coffee at home. I bought a Kuerig last year and it’s wonderful. I have nice thermal cups I bought at Costco which keep the coffee hot for hours.
Happy Monday Folks!
September 24, 2012 at 8:02 am
Another way to save on eating out and entertainment is to sign up for Groupon and Living Social. They have great deals.
September 24, 2012 at 8:10 am
I use to be a shopaholic – no joke. Anything new, trendy, flashy; I just had to have it. So here I was with all kinds of new clothes, DVDs andgadgets while my friends were all buying their first homes and I was living in my parent’s basement.
I wasted so much time and money on things that did not matter that I set myself back ten years or so in terms of where I really wanted to be.
Fortunately I started watching Till Debt Do us Part and reading Gail’s books.
Still in my parent’s basement but about six months away from buying my own house and I have curbed the shopping bug through therapy and replacing it with better activities. I also have a healthy RRSP, TSFA & profit share account through my employer. My new high comes from see the dollars add up in my savings instead of the clothes pile up in my closet.
Thank you Gail for helping set this gal on the right path!
September 24, 2012 at 9:16 am
I have always thought about saving as another bill to be paid. So at least I put away a small amount each month. Later on, as our pays went up, I was able to increase that figure. Now, retired, we are both so glad we grit our teeth and stuck to taking the $$ out of our circulation.
Although I shopped more than necessary for the kids etc, I was never a shopaholic, so that helped.
September 24, 2012 at 9:37 am
I’m far from a shopaholic. Hate it. Hate spending too, but very guilty of not saving, and when the 3 kids want a treat or something, out it goes. Also, my business expenses in growing my new business is what is eating up our finances and credit right now and it’s tough, but I have a plan and am paying it all down and the last bit of this plan is saving so….need to open a TFSA asap!
September 24, 2012 at 9:45 am
A great reminder… must admit our savings rate has slowed down since my son was born and DH started his business. We’re still saving, but not as much as before. Must look at the budget AGAIN and see what we can trim to get it back to where it ought to be. I agree that it is a habit-we have auto withdrawals to RRSP, RESP, and EF each month, so it’s like a bill. Otherwise, it would be frighteningly easy to say, oh we’ll save something next month. It’s the only way to go in my humble opinion.
September 24, 2012 at 9:52 am
I’ve always been a saver although I never deprive myself of anything that I want. I put money away for the future and also save for big ticket items before making purchases.
Two of the easiest ways to save money are to never use credit and to pay off your house in ten years or less. The money saved by not paying interest allows for a sizable addition to retirement savings.
September 24, 2012 at 10:06 am
We are currently saving 25% of our net income, and hubby finally has an RRSP. I am currently working out a way to contribute to the family coffers, and then 100% of my income will be saved.
We can do this because we paid off our debt “The Gail Way” and since we’re now accustomed to living on less, we just put it all to savings now that the debt is gone. Our savings just passed the 5 digit level, and my husband is feeling less stressed about work and money. THAT is priceless!
I’m now reading Mr. Money Mustache’s blog. He’s a hardcore saver, recommending 75% of income go to savings so you can retire young and live off your returns. Obviously not for everyone, but it sounds good to me!
September 24, 2012 at 10:06 am
About 2 years ago, there was another post about savings and it listed something about having automatic withdrawls and I posted my reasons for why I couldn’t.
So this is a shout out “Thank you” to Geoff, for arguing the point with me.
After reading his reply to my excuses, and thinking about it… I decided I would try it again (it had been at least a decade since my last attempt). I didn’t really think it would work.
I signed up for ING Direct that day.
I’ve played a bit with the different withdrawal amounts and created a couple of different savings goals…
Long story short, the balance on the 4 accounts is $5938.44
So thanks Gail and Geoff!
September 24, 2012 at 10:23 am
Since having our daughter who is now over 5 yrs age, our hard core savings has somewhat dwindle but we are still saving $$. I am very glad to have money in the emergency acct, with a savings acct & tfsa. We are slowly progressing, one paycheque at a time, however every dollar we save gives me the piece of mind that we are working towards a comfortable retirement while still being able to do things today.
September 24, 2012 at 10:35 am
@ April, I have been a realtor for over 20 years, and know from past posts that you are a newbie in the business.(I hope this is the correct April)
Please put saving at the top of your list, even if it takes longer to pay down your debt. As a Realtor, we can have months and months that go by with no cheque but the bills still need to be paid and the kids still need to eat.If nothing else your savings will help pay the tax man, because all that HST thats on your cheque needs to go back to the government, and if they don’t get it, they can get nasty.
Please set up the saving account.
September 24, 2012 at 10:41 am
Kat, I love your comment.
I love it because while we’re all here to learn from Gail, it’s great that we can learn from each other as well. I learn from Gail’s posts, but I learn even from from them because I see the reaction other people have to those posts, and different points of view.
I’ve also learned from other posters directly, so here’s a big ‘thank you’ to you all.
September 24, 2012 at 10:58 am
Wow, I have gotten so far off track in the last year and a half! We got a new house and since then I’ve been shopping, shopping, shopping. I was trying to figure out how I paid off tons of debt and wasn’t such a shopper before. I realized that I used to have a really cheap hobby that I had put aside and my hobby became shopping. I picked up the really cheap hobby again and now shopping just isn’t that interesting. Whew, now I can finally get back on track!
September 24, 2012 at 11:14 am
The funny thing is, despite all my savings for medium term costs (travel and larger expenses), I also have enough short term contigency money left in my budget each month that it can cover a lot of those little expenses on weekends away and nights out. As such, my medium as well as long term savings always seem to grow rather than shrink.
I have to remind myself that having saved for the future really well, I should go out and have a little more fun if an opportunity seems worth it. I guess saving can be addictive.
September 24, 2012 at 11:40 am
Hi Everyone,
I have started putting my coupon “savings” in my TFSA. Over a few months this has really started to add up! Also, we have finally started a monthly meal plan – which saves money in a couple ways. My kids have a say in what we eat , so there is less waste – and I can stock up on discount and sale days. And, we can also try to eat out of the pantry and freezer a couple days of the week. All small changes – but they do seem to be adding up!
Thanks everyone for the great advice!
September 24, 2012 at 12:10 pm
Great posting, enjoy reading all posts. Slowly saving…..great to know that my two kids have an RRESP and that I have an RRSP. Every blog that Gail writes helps in its little ways, thanks Gail….:)
September 24, 2012 at 12:24 pm
We found the best way to save each month was to call all our utilities, insurance, cable, cell, and home phone companies and look at ways to lower the bills. Although we never carry a balance on our credit card, I’m assuming that calling to get your interest rate reduced would have the same effect.
We each called one company on our lunch hours during the week and it was all done within the week – but the savings have lasted for years! We saved TONS on our monthly budget and we didn’t have to sacrifice anything with our entertainment or food budget.
We now call every year in January (at the same time that we request our annual credit report) to make sure we stay in line.
September 24, 2012 at 1:39 pm
I’d been going by the Wealthy Barber “save 10%” rule, but have just been looking at a couple of sites where they suggest saving 50%, then retiring in under 10 years. Yikes! Anyone able to do so?
September 24, 2012 at 1:47 pm
When I started saving (more), I’d been inspired by Gail–both on TV and here in her blog. I setup a series of rules and “quotas” for myself–I was only allowed one lunch out per week, one dinner, one DVD per week and it must cost under $10, no carry-overs on any of them, a etc. (Quotas are like a budget if you think about it–only you’re not really denying yourself anything–you just have to wait a few more days.) The savings started piling up. Then I started wasting even less because I found I slowly didn’t even want “stuff” anymore. And when I did (occasionally) go out for dinner with friends, it was that much better/tastier because I appreciated it more.
When the savinsg/investment account balances started to go WAY up, I became much, much, more interested in that than I was in getting DVDs, books, lattes, or electronics. I’m now keeping 35% of my take-home pay (without noticing any consequence to my lifestyle) and I think I might even experiment and push it to 40. Thanks, Gail!!
September 24, 2012 at 2:53 pm
I don’t get how anyone can save 50% of their income, unless they are in what I consider an unusual circumstance. I personally consider it impressive that my wife and I manage to not carry any debt and are paying down our mortgage an extra $15K a year with modest emergency savings. With daycare consuming $20K, saving for resp, everyday child costs, toronto house prices 6x average income, food and transit costs going up and up, it’s really the best we can do. We do max our RRSP programs at work, effectively saving 13% of our income for retirement, but tha’ts about it.
PS Kat – thanks for the shout-out! Great work – you get all the credit for doing it though! I like to think I don’t argue as much as offer an alternative opinion sometimes.
September 24, 2012 at 3:45 pm
I am saving 50% of my income – my house is paid off, I am totally debt free and I have no kids (I am 46). It can be done, but will be a lot more difficult when you are younger and have small kids at home and are still paying off your house. Once you get past that, you will see how easy it is.
September 24, 2012 at 6:48 pm
Thanks for the reminder to think like this, Gail. Natalie, I think I will start getting back to some of my cheap hobbies and away from shopping too, that’s a great idea.
September 24, 2012 at 7:00 pm
@ Geoff:
On good months, I put aside 40%, but that money is in part being set aside in my down payment, emergency, and rrsp funds.
That said, I have already paid off my student loan, don’t have a mortgage, don’t have a kid, and if my take home pay was more than $2,100 a month, I would be able to save more with more ease. At minimum, I can still set aside 25%, but my goal is always 40%, though life sometimes takes up more than the 1% available after savings, joint expense (food, rent, etc) and transit!
September 24, 2012 at 8:29 pm
@ Emma / Tara – thanks for your responses. Without in any way diminishing your accomplishments, you’ve made me feel a bit better in that neither of you ‘are in the same boat’ as us (mid 30s, both working, children+house, no relatives nearby).
September 25, 2012 at 8:54 am
Have learned so much from Gail, but one thing I’m lost on is where the best place to put my savings is. I’m starting late, mid 40s, due to some bad financial decisions but am on my way to good financial health. Please advise
September 25, 2012 at 11:41 am
Geoff, you’re definitely at the most expensive part of your life. If you read Moneysense, they discuss how being in your 30s with kids and a mortgage can make you feel like you aren’t getting ahead and are being left behind by every other demographic group, but you aren’t as long as you’re paying down the mortgage, saving money for your kids’ education (preferably in an RESP for the grant money) and putting money aside for retirement. In another decade (and even moreso in two), you can do a lot of catching up then. Just don’t let the extra money available at those stages become “fun money” (save it!) and you’ll be in good shape.
September 25, 2012 at 2:24 pm
I feel much like Geoff. Married 2 kids, a house, 2 cars and expenses flying at us at warp speed, I feel its tough to feel like Im really making a dent. We live on cash and are getting pretty good at it. But it does get discouraging when you have made plans to save some money one week and it just cant happen beause of this or that. I try and stay focused on the good we are doing paying down debt and saving but I just get discouraged its not moving like I would like it too
I love my children and dont want them to grow up but at the same time I am looking forward to the feeling of hemeraging money going away one day LOL!! Thanks for all the advise gail, you inspire me and have really made a difference in my life. I am getting educated in the world of money and it all started with you.
September 25, 2012 at 3:39 pm
>>>>>>Becoming financial responsible should not doom you to a life of boredom and denial.
I think this may be the reason that many people don’t begin to budget – believing that the budget will control them instead of the way it actually happens, where you control the budget. Starting a budget is the beginning of having more money, not less.
September 25, 2012 at 10:55 pm
We have no debt, and save a lot. Mid 40’s and kids. It is so hard these days with prices going up and up! Right now I feel like I only spend on the children and not on myself. I don’t want to rush them growing up but I do look forward to spend some of my money on me!! There is no better way to save than automatic withdrawal.
September 26, 2012 at 3:10 am
Ask a teenager what saving is and he would say, I care a darn about it. Saving that extra $ is a life saver always, a help in that hour of need when all other source looks beyond reach. A small step a small saving makes that reach so very easy.
Being shopaholic is not that bad but be ready to face that day when your excess spending leads you a disaster where you have to look around for every $.
Saving in health related matters is always a wise decision, cause you will not be a teenager for ever. So think wise and choose wise and make wise decisions now and save for the future.
October 4, 2012 at 11:56 am
What age do people normally pay off their mortgage?