I’ve been reading several blog posts lately on money saving and management habits that people employ day to day. Namely Four Pillars and Thicken My Wallet have posted on this topic as of late. I wanted to share with my readers what I believe is my unique approach to money saving and management.
To simplify, I’ll lay it out step by step.
1. AUTOMATE RRSP contributions. We do not even see this money, as it is directly deposited into our RRSPs.
2. We get paid on ALTERNATING weeks (ie wife gets paid one Thursday, I get paid the next.)
3. Use CREDIT CARDS. I find this makes things extremely simple as I can expect about 80% of our discretionary spending to come in on 2 bills (mine and hers) each month on the 14th. Obviously bills get paid in full always.
4. MAKE SAVING YOUR FIRST PRIORITY. When I see money come into our account on payday, my first instinct is to transfer this money into my BMO InvestorLine account for investment savings. No reason for funds to sit in the account if there is no immediate plan for use. In fact the simple fact that the money is there may subconsciously create temptation to spend, which I want to eliminate.
5. LOOK ONE WEEK AHEAD. I find looking ahead at shorter time periods (1 week) allows me to save more. If the money that was just received is not needed later in that week then it get saved.
6. Use one account and make it an ELEVATOR. By an ‘elevator’ I mean cash gets on and cash gets off. No money sits in the account for more than 1 week. Why keep money from having the potential to grow? I don’t want to contribute to my bank’s pool of deposits (funds they invest).
7. EMERGENCY FUNDS DON’T HAVE TO BE CASH ON HAND - I don’t believe in keeping emergency funds, as we have a significant unused line of credit and significant non-registered investments that could be liquidated on demand if things went to hell in a hand basket.
8. TAKE ADVANTAGE OF DEBT SPARINGLY when appropriate, usually for investments or short-term timing/convenience issues. Don't use overdraft, and don't take on excessive line of credit debt.
This strategy has allowed us to maintain savings rates (of net income) in the 35% range.
I welcome comments, and suggestions regarding what works for my readers....