Canadian Personal Finance Blog

Now we have used whatever method we feel comfortable with to find out WHERE the money is going (or at least we have a good idea of where the money is going). Can you guess what the next thing to do would be?

Let’s review, we know:

• How much money we make
• How much money we spend and where

Given it is very hard to increase how much money we make (for most of us, if you CAN increase your income, find a way to do so), the only other way to increase your Savings is by? Yes, you guessed it, decreasing your spending (and anyone who is surprised by that statement, needs to give their head a shake).

So, let’s just cut out our Mortgage or Rent payments and we’ll save a FORTUNE over the year, right? (again, give your head a shake if you thought that was a good idea). So this whole saving money thing is a little harder than that, you need to figure out:

1. What are your essentials (i.e. Shelter, Food, Job related, etc.,)
2. What are your non-essentials (i.e. Stan Mikita Lattes, QD Dilky Bars, Order in Pizza, Cigarettes, New Computers, Sports Car, etc.,)

Essentials usually can’t be easily “scrimped” on, I guess you could find a cheaper house or apartment to live in (or move into your parents basement), but let’s not go there for now. Non-essentials, this is where you can $AVE money.

Hold on a minute!!! This is why 9/10 of us cannot control our spending, the non-essential things in life are what adds the spice to things, it’s what we ENJOY. Most people drink Lattes, smoke cigarettes, go to bars, and eat out because they ENJOY it. This is your choice, like losing weight, saving money is a CONSCIOUS lifestyle change, that you must make (and continue to live long after you have got out of your financial hole).

Wow, no wonder it is so hard to have control of your spending. You have to break a lot of habits and make sacrifices in your life (and continue to make those sacrifices). If you have got this far and decide, this is NOT for me, ok, I get that. Some folks aren’t going to be able to do this by themselves, and I guess that is why financial planners make so much money.

Enough of the inspirational commentary (but again, maybe you want to talk to your local clergyperson, a friend or someone like that about your financial worries). Let’s get back to the topic at hand: CUTTING NON-ESSENTIAL SPENDING!

What is non-essential? Well, that again is up to you, but let’s look at a couple of real-world examples I have seen amongst some folks I have met:

• If you have season tickets to a local sports team and it is costing you $2500 per seat, and you have two seats?
• If you drive a Lexus SUV and carry $14000.00 on your Visa card?
• If you eat out 3 nights a week, yet have a large credit card balance?
• You take lavish vacations every year, but are in danger of defaulting on loans?

Does this describe you? Man, you really need to give your head a shake if this is you. THINK! The argument, but I NEED those things is SELFISH, and here is where you need to START.

If you don’t have these obvious HUGE non-essential spewings of money, good for you. You want to save money, then you can still find savings in small areas:

• You order Pizza out once a week on Friday as a treat. That’s about $25.00 isn’t it? Cut that down to once every two weeks, and you have saved 26 * $25.00 = $650!! Not bad money to put away for a rainy day.
• You smoke? OK, aside from the health risks, quitting smoking could put your kids through University (if your kids are in Grade 8 now, and you put your smoking money in an RESP, they should be able to go to a very nice University).
• You buy lunch at work, how much are you spending? Yes, everyone needs to eat, but if you brown bag it a couple of days a week, how much are you going to save?

See how easy this is? It has to be easy if I can figure this out, so go off and figure out where you can STOP spending and START saving! Don’t turn into a martyr right away, start off slowly, you don’t want this to be like the time you tried to lose 10 pounds in 2 weeks and ended up gaining 20 pounds the month after. Pace yourself.