Budget Sense

You’re cruising along with your trusty car, and everything seems fine. But let’s face it: in 5 years, you’ll eventually need to replace it. It may seem daunting to start saving for such a big purchase so far in advance, but here’s where you’re mistaken. Now is actually the best time to kickstart your savings plan.

But what about those smaller yet significant expenses looming just a few months away? Take, for example, a dream family vacation to the Caribbean, costing a few thousand dollars. With exactly 5 months to save up $5,000, how can you effectively budget and save for such an adventure?

Break It Down into Manageable Pieces

One effective strategy, commonly used in goal-setting and project management, is to break things down into smaller, more achievable targets. For your upcoming vacation, instead of fixating on the $5,000 price tag, focus on saving $1,000 per month over the next 5 months. By shifting your perspective, you’ll find it easier to grasp and rally around these more digestible milestones.

Create a Dedicated Bank Account

Given the substantial amount you’re saving, it’s crucial to establish a separate bank account exclusively for your vacation fund. This separation sends a clear message that this is a special project requiring your utmost attention. By compartmentalizing your finances, you’ll maintain a laser-like focus on the bigger picture without distractions from day-to-day expenses, debts, or other financial commitments. In other words, no matter what’s happening elsewhere, this account will be your unwavering resource for funding your dream vacation.

Explore Multiple Income Streams

Unless you have a substantial income with zero financial obligations, you’ll likely need to tap into additional revenue streams to achieve your savings goal. Begin by calculating how much money you can contribute each month from your current job, and then brainstorm ways to secure the remaining funds. Can other family members chip in? Are there upcoming bonuses or windfalls that can be allocated entirely or partially to your vacation fund? Consider taking on a side gig or part-time job. You can even explore opportunities for extra hours at your current workplace by discussing the possibility with your manager. Lastly, declutter your home and sell any items you no longer need online. Remember, the more income streams you can generate, the easier it becomes to save for your eagerly anticipated getaway.

Remember, the key to success lies in starting early and planning ahead. By giving yourself ample time and diversifying your income sources, you’ll significantly increase your chances of reaching your savings goal. Let’s embark on this journey together and make your dream vacation a reality!

Inflation has become a reality in every facet of life in the last 12 months or more, but it is nowhere as evident than at the grocery store. It is almost depressing to know that for the same budget, you are getting much less than what you used to do back in 2021 or beyond.

With that being the case, saving money on groceries is more important than ever, while still trying to get healthy and good quality food. A delicate balance that requires some research and effort. Groceries can make up a significant portion of one’s monthly budget, but there are ways to reduce these expenses without sacrificing the quality of food.

One of the first and most effective ways to save on groceries is do an an inventory on what you already have at home, be it in the fridge, pantry, cold room etc., and ensuring you are using those before you have to buy the same items again. You don’t want your food at home to expire before you buy the same item again. This has happened at our household before and we are careful to check and make sure we know what we have already. Another related tip which a lot of you have heard of is to eat before you go grocery shopping: feeling full while there will magically make you want to skip a lot things that you would otherwise put in your shopping cart without much thinking.

Another way to save on groceries is by using coupons and checking weekly flyers. . There are many sources for coupons, such as flyers, online coupons, and loyalty programs. By taking advantage of these offers, one can significantly reduce their grocery bill. It’s important to note that coupons should only be used for items that are already on the grocery list and are needed. Using coupons for unnecessary items can end up costing more money in the long run. However, I am one of the last people to suggest that you go to multiple stores to find deals and use your coupons as that is a waste of time and gas which defeats the purpose. Aim to go to max of two stores , preferably within 5 KM of each other or less.

Another approach that can help, if you don’t mind making trips to two different stores, is to buy the food items where quality matters (meats, fruits, vegetables) from one store, and buying other less essential items (cutlery, condiments, canned food, frozen food) from discount food stores. This approach will ensure you are balancing quality with lower prices.

Strategies such as taking food inventory, using coupons, and shopping at discount stores can help you save on groceries in today’s high inflation reality. By being mindful of spending and taking advantage of cost-saving opportunities, one can reduce their grocery bill without sacrificing the quality of food they eat.

Thanks to James Clear’s extremely popular book, ‘Atomic Habits’, the study of habits has become a very popular topic in the last few years. Podcasts, blogs and the personal development field in general have all picked up on it and made it into a trendy topic to dissect and discuss. Personally, and despite having been in what seem to be a minority who have yet to read the aforementioned book, I been increasingly using the power of habit formation to solidify different health and money aspects into my life recently and they have become second nature. Some of these include:

Walking for half hour daily , for a min of 5 days a week: ever since Covid lockdowns were imposed in March 2020, I stopped going to the gym and never been back since. I replaced that with walking, and hiking in the summer. My walks have been such an integral part of my life, that I currently have an amazing 1,000+ day move streak on my Apple Watch! I couldn’t have set such an amazing streak without the power of habit formation, where something becomes almost automatic and not much effort or thought goes into starting it.

Flossing at night : while I have always took great care of my teeth, including period visits to the dentist, flossing is something I was never consistent with. No more. After coming across this article, and applying what I know regarding habit formations, flossing has now become a daily thing since Jan 1st of this year and I have never skipped a day.

Doing 15 push-ups a day: this actually started last year, where I started with 10 pushups a day, and increasing it by 1 every month, so that by December, I was going 22 pushups a day. This made it into a daily habit, so for 2023, I have been a daily count of 15 pushups and I have yet to skip a day.

Applying the power of habit formation to further our finances

The power of habit, once automated, is a force to be reckoned with, . Habits are the actions we take every day, whether we realize it or not. They can either push us forward or hold us back. When it comes to finances and money, habits can be the difference between living paycheck to paycheck and building wealth for the long term.

To start, one of the most important habits to cultivate is saving money. Saving money can be difficult, especially when we live in a culture that encourages us to constantly splurge and spend. However, by making saving a habit, we can set ourselves up for financial success. But how? One way to do this is by automating our savings. Most if not all banks nowadays offer automatic savings plans that allow us to set aside a certain amount of money each month. By doing this, we don’t have to rely on our willpower to save money. It becomes a habit, and before we know it, we have a substantial amount of money saved.

Another important habit is tracking our spending. It can be easy to lose track of where our money is going, but by keeping track of our expenses, we can identify areas where we can cut back. This can be as simple as using a budgeting app or writing down expenses in a notebook, but the latter is not as popular these days due to the advent of apps which makes tracking easier.

In addition to saving and tracking our spending, investing is another habit that can lead to greater wealth. Investing can be intimidating for those who have never done it, but by starting small and consistently investing a portion of our income, we can build a portfolio that will grow over time. What matters is taking that first step, automating it, and then forgetting about it for the most part, other than an annual or semi-annual review and making adjustments if needed.

It’s important to note that building wealth through habits is a long-term process, requiring patience, and not something that will happen overnight. But what is virtually guaranteed is that by consistently practicing good financial habits, we can set ourselves up for success in the future.

One example of the power of habit in action is the story of Warren Buffett. Buffett is known for his incredible wealth, but what many people don’t realize is that he built his fortune through consistent, disciplined habits.

Of course, developing good financial habits is easier said than done. It can be difficult to break old habits and develop new ones. However, there are a few strategies that can make the process easier.

One strategy is to start small. Trying to completely revamp our financial habits overnight is a recipe for failure. Instead, we should focus on developing one habit at a time. For example, we could start by automating our savings and then move on to tracking our spending. Another strategy is to find accountability. Whether it’s a friend, family member, or even a financial advisor, having someone to hold us accountable can make a big difference. These can help us stay on track and offer support when we need it. Last but not least, it’s important to recognize that this requires patience. Developing new habits takes time, effort and dedication. We will likely make mistakes along the way, but it’s important to stay focused on our long-term goals.

In conclusion, the power of habit is a powerful tool when it comes to building wealth and be financially independent. By developing good financial habits, such as saving, tracking our spending, and investing, we can set ourselves up for financial success. While it may be difficult to break old habits and develop new ones, with time, effort, and patience, we can build the habits that will lead us to a more secure financial future.

Imagine how banking used to be done just 10 years ago, never mind 20 or 30 years ago:

If you wanted to send money to someone or pay a bill, you would usually have to go to a bank, thus wasting time and even gas driving there to do your banking. Yes online banking has been with us for more than a decade, but it was for the select few that felt comfortable using it. It is only the last 10-15 years, after the invention and popularization of mobile apps, couple with online security becoming more solid, that it really took off and has become an essential part of our budgeting and finance management. This is just one example of how technology has simplified how we manage our money, save it, and by extension help us become richer. While there are countless ways that technology can be used to simplify our finances, below, we look at some of the most popular ones.

Using apps to manage your money

As mentioned earlier, apps are at the heart of this digital revolution of how we manage our money and finances. As they say, there is an app for anything you can think of, including banking, price comparison, online shopping, product reviews etc. One of the best features of online banking apps is your ability to manage your bill payments, transfers and sending money so much easier. One specific feature I use is to transfer money from my checking account to my VISA account as I make purchases. With all of these at our finger tips, they should be used extensively to get the most of your money.

Using online price comparison tools to decide your next purchase

Whether it is to book travel, buy a car or a household appliance, never buy an item that will cost you hundreds or thousands, without using 2 or 3 sites to compare price. For example, if you are booking a flight from Toronto to Los Angeles for 3 adults, the difference between two sites for the same flights could be anywhere from $100 to $200. Same goes with buying a laptop or other electronics: some sites may be running a promotion where you can save hundreds compared to buying from another site. So there is absolutely no reason to buy from one site without looking at other sites. While there are plenty of apps that will help you do this, there are browser extensions for doing it the old way from a laptop and desktop. Again, other than the need for a car if you are doing deliveries and transportation, the only other thing you need is a phone with an internet connection: technology will take care of the rest in helping you make a good and reliable income.

Robo advisors

This is a new feature that is becoming more and more popular with banks and investment firms: it is a technology that lets you automate your investment and have a computer do the work for you. In other words, it provides financial planning services through automated algorithms, without any human involvement. And what makes this service even more appealing in addition to making things more automated and less manual, is the fact that it learns and adjusts as you go. It does this using AI (Artificial Intelligence) . Most banks offer this service now, thus freeing you from having to manually check your portfolio and adjusting things every few months.

Side Hustles

Uber. E-Bay. Youtube. Etsy. Kijiji. TaskRabbit. DoorDash: these are some of the hundreds of apps and online platforms that you can use to create a side income; a fulltime one for many. What makes these platforms appealing is their flexibility, where you can create your own schedule for the most part, all by using your phone only. It is not uncommon for some people to have a combination of these various tools at the same time: for example, some could use DoorDash to make food delivery, Uber for ridesharing, TaskRabbit to complete small jobs in the neighborhood and E-Bay to sell books and other used items.

Of course, like with a lot of things, technology has been a double edged sword, where it has also made it easier for people to spend money online, using just a few clicks. In the past, you would need to get dressed, drive down to the nearest store or mall to be able to spend your money. Now, you can do it 24/7, even if you are in your pajamas or in your bathroom.

The various digital tools at our fingertips not only make it easier to manage our finances, they can help us save a lot of time if used properly. Take the time to go through your finances and investments and see if you are taking advantage of all the digital tools out there.

You have been paying off your new iPhone for two years and it has now been fully paid off and come off your bill: your phone bill is now $30 less every month. You happen to be a lucky (or good employee) who just got a 5% raise to their salary. Or maybe you are a good driver and your new insurance premium is $40 lower per month.

These are all examples of new money coming to your budget. Not a bad position to be in, especially if your budget was already stretched to the last penny.

The natural question that comes to mind is: what do you do with this new extra money, assuming it is anywhere from $25 to $50 per paycheck (bi-weekly pay) ? do you just spend it? do you save it? or maybe a combination of these and others? First off, and unless you already fulfill your other obligations in terms of saving and have no debt to pay off, the worst use would be to just spend it. This is money you never had it so you can’t just spend it. There are much better ways to put it to use instead:

Start or increase charitable giving

There is an inspirational meme I came across recently: “when god blesses you financially don’t raise your standard of living, raise your standard of giving instead”.  So instead of wasting this extra money, dedicate some or all of it to charity. Assuming you have an extra $40 in your budget, that would be barely enough for a dinner night out for two, whereas dedicating it to charity would go a long way and feed many people at once.

Pay off Debt

Unless your debt is $1000 or less, getting an extra $25-50 in your budget and using it to pay off debt, may not be significant enough if your debt is a lot bigger (say in the tens of thousands) . But if you weren’t paying enough towards your debt reduction, then it makes sense to dedicate this newly found money to go towards that. For example, if you were only paying $35 per paycheck, you could double that to $70 which means you are now paying close to $2K towards your debt elimination.

Saving and Investing 

I often tell friends and family that you can never save or invest enough money. The more the better. The higher the amount your save and invest, the faster  you get to financial freedom and independence. So while putting an extra $650 to $1000 towards saving and investing each year may not seem like a lot, it does when it is being added on top of existing money that you set aside for this purpose. For example, if you were saving just over $4K a year, adding an extra $700 a year will put you over $5K a year and with the passage of time and magic of compounding, your money will exponentially increase after just a few years.

When new money comes to you or is freed up from your budget, you are free to spend it as you like, since it is your money after all. But there are better uses for it than to just spend it. Think of this as money you never had, hence it doesn’t make sense to just blow it on useless purchases. Instead, think of helping others, paying off debt or long term in the form of investments.  Any one of these will have huge positive impact and returns for years to come.

If you got a refund on your income tax filing this year, congratulations, but now the important work begins: what to do with this money and how to budget it? Obviously, different people will have different ways of using and allocating this money, but generally speaking, there are better ways to use it than to just spend it all on a vacation or purchasing big ticket item etc. Also, the amount of your refund is also a big factor in what you do with the money; if your refund just around one hundred dollars, then save yourself the budgeting and all the thinking and just spend it any way you like, since it is an insignificant amount. On the other hand, and this article is based on the assumption that your refund is couple hundred dollars or more, then read on to help you get ideas on what to do with the refund:

Roll it over to your RRSP to get another refund next year
This would be the first and best use of any refund money. Depending on your situation and the amount of refund you got, you may redirect some or all of the money to your RRSP, and that in turn will generate another – or bigger – refund next year. This also accelerates your retirement nestegg, especially if you started saving a bit late.

Pay down debt
For some, this may be the bigger priority over their RRSP savings and that is totally understandable. If you have a big debt and got a big refund, then it makes sense to dedicate most if not all of your refund towards paying it down. On the other hand, if you only have a small debt left (say $1000) and your refund could cover all of that, then it is easy to figure out that you should use your refund to get rid of this balance.

Save it towards a big purchase or goal
Again, depending on what you are saving towards, whether there is something specific or just general savings – including building an emergency fund – rather than spending the money, best to save it and feel good about yourself. This is a way to help you look back in the future and have something to show for your hard work. In fact, assuming you get refunds that are $1K or more, and assuming you save even $250 of those each year, in couple of years, you have saved over $1K without much effort

Donate to a charity
This is something not a lot of people think about, but you should contribute a portion of your refund to help a charity: you get to help and feel good, while also getting a tax deduction: two in one!

Last, and certainly least: spend and enjoy it?
If, and this is a big if, you happen to be a lucky person who has no debt, has enough money saved and has maximized their RRSP contributions, then by all means go ahead and enjoy the money, be it to buy something new, book a vacation, or other ways that are specific to you and your lifestyle.

As mentioned, while some may prioritize their RRSP savings or paying down debt, at the end of the day, some combination of the above is the best way to go. Once you know what your refund amount is, sit down and spend some time going over what the money will be used for, and write it all down. Then come back to it a few days later and review the list again, to avoid the chance of forgetting any important item. Once you have confirmed how the refund will be divided, go ahead and take action by distributing the money accordingly.

Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it” . If something has the backing of arguably one of the smartest people in history, you can surely trust it!

Compounding is the process whereby interest is addedto an existing principal amount as well as to interest already paid. We have heard of something called ‘tax on top of tax’ which governments may annoyingly do at times. Compounding is similar to that but in our favour: it is effectively interest on interest.

Compound interest is when you add the earned interest back into your principal balance, which then earns you even more interest, compounding your returns. For example, Let’s assume you have $5000 in a savings account that earns 5% in annual interest. In year one, you’d earn $250, giving you a new balance of $5250: by next year, you will earn interest on this new amount of $5250 and so on. Before you know it, your money has magically gotten much bigger than what you started with, especially if you give it enough time to grow exponentially.

You may have read the example of a penny that doubles every day to become worth over $5,000,000 by day 30. While that is an extreme example, the lessons here are applicable: that compounding + time , ends up doing wonders to your money.

Compounding can also be thought of in terms of dividend reinvestment plans (DRIP) where money earned from dividend income is reinvested to buy more shares which in turn end up buying more shares and so on.

At the timing of writing this article, savings interest rate are at an almost decades high, with some banks paying 5% or more for certain savings or GIC accounts. So putting $10K in a savings account with such a rate will give you $500 in one year and you can then reinvest that amount and in one year from then (assuming the same 5% rate) you would get $525 on that $10500 for a new total of $11,025. So using compounding, you turned $10K into $11K and change in just two years! Now imagine if you had more money and have more years to leave it there. For example, if you leave your money in the bank for 5 years, and earning the same 5% interest rate, you would get close to $3K extra or $12,762.82 to be exact.

Compounding is a great tool to use on your road to wealth and financial freedom. It is effortless and it helps that we are now at decades long historical highs for interest rate paid by the banks. So put it all to use and reap the benefits in just a few years.

When reading a financial tip or advise, we sometimes shrug it off and think that we already know about it. But knowing is different from applying.

This is the case with spare change and how they can help us save money, but it is still not obvious enough to make people keep them handy.

Having coins handy can go a long way in reducing your spending and in turn maximizing your savings. When you break a bill, no matter how big, chances are you will spend the leftover money faster than if the bill was never used. Having spare change on the other hand will help you avoid breaking up big bills. This trick is more psychological in nature but it works.

The thing we buy most often while at work or driving is probably coffee. And this is pretty much an everyday occurrence. If you save enough change, you could go days without having to break any of your big bills. Which means more money in your pocket.

If on the other hand, you need to buy something that will cost you a a dollar or two, and you have no change, you will have to break a big bill, like a $20. What will happen next, you are left with some change and smaller bills. Once the big bill has been broken, a psychological barrier has also been broken. Now that the bill is smaller, you are more likely to spend it. And as it gets smaller, you will be even more and more likely to spend it all, and so on.

Therefore, and to keep your bills intact, and not have to break a $50 for a $2 coffee, be sure to have as much change handy as possible. It is a paradox to think that having spare change can act as defense against spending your bigger bill and it is. Try it, and it won’t be too long before you get into a habit of not wanting to break your big bills and only use spare change for smaller purchases. 

Money is something we should enjoy and use for good. It is not something we should stress about or cling to at all costs, otherwise, what is the point really? The idea is to feel good and express gratitude about your ability to spend on things you enjoy and brings you and those around you joy, great experience and utility. So how do you achieve this? It starts with being financially efficient.

Financial efficiency is a simple concept that is lost on many: it is basically your ability to stretch your money, where you are spending it on things that matter the most and bring you the biggest value, while reducing wasting it on useless things.

Peak financial efficiency is to maximize the gap between the two: spending money on things that give you the greatest value – be it joy, utility or other measures- while being ruthless with wasteful spending , be it fast food, unnecessary monthly subscriptions etc.

But problems arise when you are not even sure what is useful and what is considered wasteful and in fact may even mix the two, thus completely ruining the definition of what it means to be efficient with your money and finances. In that case, you need to do an audit of your weekly and monthly spending and decide on each item: whether it is something that you are using and can’t live without. Is it something that makes you happier? Does it make your life better and more convenient? How much does it cost compared to the utility you are getting back? For example, let us take a hypothetical monthly GYM membership that costs $60. On the surface, having a GYM membership is money well spent given the huge health and mental wellness benefits. But that is only if you are actively using your membership and going at least 2-3 times a week, on a consistent basis. Otherwise, if you hardly ever go – say once a month – then this otherwise great use of money turns into waste and you are better off eliminating it by cancelling the membership. Just walk outdoors instead.

On the other hand, if time with family means the most to you, then spending money on a Netflix subscription wouldn’t be such a bad idea, as you can watch and socialize together. At the end of the day, what is considered useful or wasteful is subjective and may vary from one person to the next. I may value having a car even if total mostly expenses is in excess of $500 while someone else may view that as total waste and would rather just take public transportation.

It is said – backed by research- that most millionaires achieved their status by being extremely efficient with their money. They reduced wasteful spending almost to a science, while turning the act of spending their money on useful things into a work of art. In other words, being financially efficient with your money will translate into financial stability and security in the long term.

Traveling is a lot of fun but finding the right deals and finally booking it can be time-consuming and even stressful at times.

There are now literally hundreds of places you can visit, both online and offline, to find a good deal on your next vacation, flight or cruise. So with all these choice at your fingertips, how can you ensure you can find the best deal without losing your sanity? Here are some easy tips that will ensure you are getting the best deal as well as having the perfect vacation.

Start looking at least 3-6 months out

If you have a good idea of what your timeline for travel will be, start searching for your vacation at least 3-6 months before your expected travel dates. For example, if you know you will be off work for 2 weeks in July and would like to visit Europe at that time, you can start searching for flights or vacation packages from as early as January. Some may think that is way too early, but from personal experience, you get better deals and be the first to a lot of things. For example, you may be the first to find out about early schedules, the choice of your seat on a plane, early promotions specials and more. But just because you start 6 months out doesn’t mean you have to book then. Only if you find a deal that is too good to be true should you go ahead and book it. Otherwise, you only have to check the prices for now and keep comparing them every week.  For my latest Vegas trip this past summer , I actually started looking at deals from January. This helped give me an idea of what prices were like and where they would likely be heading as we entered spring. After checking prices on multiple websites on a daily and weekly basis, I finally booked a vacation at a price that beat everything else I had seen.

If in Canada, watch CAD$ fluctuations

With the recent and constant decline of the Canadian dollar came an increase in travel prices, from flights, to hotels and everything else in between. Some vacation companies even announced that they would be increasing their rates due to the declining Canadian dollar. This was like the last warning sign for me before booking. Three days after I booked my vacation, I checked the price for the same package and it had gone up by about 10%, thanks to the declining Canadian dollar. This wouldn’t matter much if you were traveling within the same country (i.e within Canada or within the US). And vise versa, if you were coming traveling from the US to Canada, a strong US dollar will go a long way.

Look at 5 different websites at least and check them at least 2 times a week

There are a ton of travel booking and comparison websites out there and you should check at least couple of these as prices could vary from one to the next

Sign up for price alerts through email

I do this, especially with different cruise lines, and I always get good deals and promotions through emails. Be sure to sign up for these and never miss a deal. Instead of looking for the deals, they will come to you.

Ask local travel agents to match the best price you found

And just because most travel related activities has moved online doesn’t mean there is no room for traditional travel agents, who still have the knowledge and expertise to search, customize and package the best travel deals.

To conclude, finding good deals on vacation packages, flights and cruises can be time-consuming and stressful, but by following some easy tips, it’s possible to have the perfect vacation at the most affordable price possible. As vacations as a whole are not cheap – especially when booking for a full family – it is worth spending the time to find the best deal possible. The effort and time could save you hundreds, even thousands.