One of the most popular Money topic searches on Google is how to save more money. Most people understand that to retire or semi-retire one day they need to save money…yet the vast majority of people struggle with this.
I’ve mentioned in previous posts the statistics of the vast number of Canadians that are barely saving 10% of their income and I want to say again – this is not enough to support a comfortable retirement one day given the low interest rates most people are getting.
Most people have heard of compound interest…and the quote by Albert Einstein — ‘Compound interest is the eighth wonder of the world.’
If you don’t understand why he said that, contact me immediately and we can go through it together because it literally can mean the difference between retiring or being a Sandwich Artist in your Golden years!!
What I do want to say about Compound Interest is…it only works if you have Savings!! So how do you increase your Savings when you have so many bills to pay??
Well, as I put in the subject, there really is one key secret to increasing your Savings and it’s the Need vs Want distinction:
Most people confuse Needs with Wants. We hear this a lot with kids: “Mom, I absolutely NEED those new shoes (sunglasses, eye shadow, video games…)!!”
When in reality, they don’t need them, they want them.
They may feel like they need it, but they don’t. They’ll live without it. It is not paramount to their survival (or even their comfort or happiness in most cases…kids forget last year’s trend and move on to the next thing constantly).
So this is an easy one to see with kids and teens, and it exists with many adults too, regardless of age or income level.
I own rental properties and I’ve been in a LOT of suites where renters live. Many of these folks (but not all) are struggling to make ends meet…yet they almost all have big screen TV’s and cable subscriptions.
So should we conclude that big screen TV’s and cable are a basic Need? Some would have you believe that…but it isn’t true. It’s a Want that many people include in their list of Needs…and then don’t have money for other things (which may actually be Needs – like healthy food).
And this is not unique to renters…I know a LOT of homeowners who are making a really good salary, yet they struggle to pay the bills and have little money left over…yet they own cars that are $20-50,000 more than what they Need! (Sorry, a Range Rover to get groceries and drop the kids at Soccer is a big-time Want…not a Need)
If you want to save more money, the number one thing you can do is pay attention to what you spend your money on and resist buying (or paying full price) for some of your Wants that you have been treating like they were Needs.
• Paying more than $800/month on your vehicle? You purchased a Want, not a Need car. (See Range Rover reference above)
• Stopping at Starbucks every day for your $5 coffee (and $9 sandwich)? Cut that out to save $25 or more per week (which can be $1250/year)!! Oh…and your daily coffee is actually a Want too…sorry to burst your caffeine addiction bubble.
• Always signing up for the latest TV/Phone/Internet package and paying to have the latest phone? HUGE Want (the actual features that most of us Need are ridiculously low compared with what most people are paying for). This could be hundreds of dollars per year (especially if you insist on paying $400+ for the latest iPhone…I ALWAYS get my phones for free…and I still have a great phone that meets my needs and has super cool features).
• I’ve discussed in a past post a few key tips for more Savings – don’t sign up for Credit Cards with annual fees, stop paying Bank fees, wait for big ticket items to go on sale.
• Sleep on it. There are SO many folks out there that are trying to sell you something and almost all of them understand that if you walk out the door, you probably won’t buy so they push you to buy on the spot. Make a rule for yourself and your family that whatever it is, you will NOT buy it on the spot and will instead go home and wait 24 hours before buying it. I do this and I can tell you, I sometimes do wind up buying it (especially if I do my research and find out it really is a great price) and sometimes…I don’t. I realize I don’t really NEED it or I can wait or it wasn’t as great a deal as I thought it was. Plus, you’d be amazed what kind of AMAZING deals will get presented to you as you walk out that door…(so you go back, get that offer in writing, and still go home and sleep on it…it’ll still be there tomorrow and if not, it wasn’t meant to be).
But doesn’t all this lead to a life where I’m denying myself the things I really Want?
No…and I’ll explain that in the next Post.
This is a two-part post (lots to say) so it is To Be Continued…