In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on…
Most people are constantly looking for new ways to save more money and live more efficiently. Do you think you have a good strategy for managing your savings? As the cost of living keeps going up, and the risk of a recession looms, Canadians are going to want to ensure they have their finances and savings in the best shape possible. To help with this, here’s a quick review of some factors that can help you manage your savings effectively.
Put 20 per cent away each month
The 50/30/20 rule comes into play here. If you’re not familiar with it, this is a common budgeting strategy that aims to help people allocate their income properly. 50 per cent of your monthly income goes towards needs like housing expenses and utilities, 30 per cent for wants, and 20 per cent for savings. Managing your savings has to start with collecting savings, so this rule is a good place to begin. If you’re able to, take 20 per cent of your monthly income and put it aside for savings. Don’t just think about your present expenses and day-to-day life. Start building your savings now so you have them when you need them in the future!
Give your savings a purpose
Now that you have savings, it’s a good idea to give them a purpose. What does that mean? It’s harder to save when you don’t have a specific thing you’re saving for. In these cases, it can feel like you’re wasting money and will be more tempted to spend it. This is why you should dedicate every dollar you save to something. For example, you might be hoping to buy a new home, complete renovations, send a child to university, or go on a vacation. You should also have emergency or rainy day savings for unexpected medical or dental expenses, or in the event you lose your job. When you can divide your savings, you can better manage them because you’ll know they are going towards something worthwhile. This also means you’re less likely to spend your savings.
Keep emergency funds tucked away
Your emergency savings MUST be kept for emergencies only. While you shouldn’t spend any savings you’re trying to build, this is especially important for emergencies. One of the most essential parts of managing your savings is keeping your emergency funds out of sight and out of mind. Collecting for emergencies can feel a bit pointless at times, since no one plans on having an emergency, which makes it tempting to spend it elsewhere. Do your best to keep your emergency funds safe so they’ll be there if you need them!
Apps can be a great method for managing your savings. We recently posted a blog dedicated to budgeting apps which you can find here. While we emphasized these apps for the purpose of budgeting or debt management, savings are closely related. Many of the same methods you might use to deal with debt can be used to help you manage your savings. For example, tracking your spending, dividing your money into envelopes, and setting up bill payment reminders can help you ensure you’re saving more than you’re spending, and you’re not missing any expenses.
Delay unnecessary purchases
Impulse buying is common, so don’t feel too bad if you frequently fall victim to flash sales or enticing purchases. However, a useful way to manage your savings and not spend it all is to delay any unnecessary purchases you want to make. This might include clothing, electronics, home decor, or literally anything else you don’t need, but simply want. Force yourself to walk away and wait 24 hours. Often, once we get away from the temptation of a purchase, our desire for it wears off. If you find yourself still wanting whatever it is, after 24 hours you can return to the purchase. You’d be surprised how many items you don’t end up buying this way.
Use a broker
If you’re a home owner, contacting a mortgage broker may help you manage your savings. A lot of our equity is tied up in our homes, meaning we can’t readily access it whenever we need it. If you’re in a situation where you need to access your home equity to increase your cash flow, perhaps for paying off debts or to deal with an emergency expense, you need to get in touch with a broker. Brokers can help you understand your options for refinancing your mortgage, which can help you access your home equity and cash. However, your mortgage may have restrictions around breaking your terms, which is why it’s important to let a broker guide this process.
Managing your savings doesn’t always have a failsafe, surefire strategy. There will be times when you spend money you shouldn’t have, or you don’t contribute to your emergency fund. However, keeping these goals in mind will help you recognize the importance of saving. The longer you work towards building your savings, the better you will become.
If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.