When I was about 15 my dad tried to force me into reading The Wealthy Barber in the hopes I’d glean some skills about how to manage my meagre babysitting money and earnings from my part time job at the video store. “Ugh,” said teenaged me. “Stop telling me what to do.”
Sigh. I wish I had listened a bit more closely to either one them and their advice, because I spent most of my 20s in a constant state of awful consumer and student loan debt. By my 30s I knew something had to change and I pulled up my socks and got on track. Today I would call myself an excellent budgeter and moderate saver – not too frugal but not too spendy – and one of my biggest goals is to instill financial literacy in my son.
I asked Gurpal Siekham, the branch manager from Westminster Savings, for some simple advice about getting on track with a savings plan. “It is never too late to start saving money or to become good at saving money,’ said Gurpal.
“I like to tell clients to keep it simple.”
Gurpal suggests three steps:
Step 1: Make the Effort
“Set a budget to spend less than you earn. Being disciplined and living within your budget will allow for the build-up of savings for important purchases and a rainy day fund. This step is not complicated, it’s as easy as consulting your banking professional to get started,” he said.
For me, this was the absolute hardest step. You need to be really honest with yourself about living in your means, and not just “kind-of honest”. I also found it helpful to track my spending for a few months to really get a clear picture of where my pitfalls were – daily fancy chai tea lattes, dinners out, not paying my credit card balance every month- and where I was actually doing okay – my employer had an RRSP matching plan that deducted right off my cheques.
Step 2: Pay Yourself First
“Save your money before you spend any of it. Waiting to save money until after you spend your earnings is a recipe for failure. Move the funds designated for savings first and then work within your budget with what is left over.” said Gurpal.
“Most financial institutions have the tools to assist with automatic transfers to savings plans so its effortless and you don’t even have to think about it.”
This tip is actually what saved me and got me back on track. On payday, all of my automatic withdrawals would come out and go where they belonged, and I would get to use whatever was leftover for my fun money.
The one thing that was a bit trickier was rent – my landlord wanted rent paid by post-dated cheques rather than an automated withdrawal, so I set up one to send my rent money to a chequing account I couldn’t access with my bank card and wrote the cheques from that account.
Step 3: Set Your Priorities
Gurpal pointed out that most Canadians spend more time planning a big ticket purchase than they do looking at their current financial situation or their future financial needs. “The reality is saving money today will make those items easier to obtain and allow for a more comfortable future as well,” he said.
This is so true! I spent a lot of time planning my next phone acquisition than I thought about long term planning. I was more than happy to finance a big phone spend, and wound up paying interest. Now, I live in a cash based world and save up for those spends.
Gurpal suggests talking with your bank and make a plan. If you don’t have a bank or want a second opinion, I recommend getting in touch with Gurpal at the uptown branch of Westminster Savings. You can call him Tuesday to Saturday at 604-517-0100 and he’ll set you up.