Banish debt to save some cash
A pair a Manolo Blahnik heels for each day of the week. A three-week exotic vacation each year. Season tickets for two to the opera, ballet and theatre. It's fun to daydream about what you'd do with more money.
You can realize some of your dreams without getting a second or third job to finance those ambitions. And you don't have live a no-frills lifestyle to stash away for that yearly vacation or some spa visits. Follow these six easy steps and you could save up to $300 a month without feeling deprived.
1. Banish bad debt and save up to $50
Before you travel to Bali, pay off your bad debt. “It's the debt you take on in order to spend,” says Tina Tehranchian, a certified financial planner for Assante Wealth Management in Richmond Hill, Ont. “Good debt is tax-deductible — you take on in order to invest and to make money.”
Credit card interest rates are high — often close to 20 per cent — so consolidate your debt onto something with lower interest, such as a personal line of credit. (Banks determine the exact rate based on your credit history.) The switch could save you a chunk.
For example, Tehranchian says that if you have a $5,000 balance on your credit card, you pay about $1,000 a year in interest. Transfer your balance onto a line of credit at prime plus 1.5 per cent (a likely rate if your credit is good) and you save roughly $625 a year, or about $50 a month. Use that savings to pay down your loan faster.
When you're debt-free, stash the cash for your short-term desires, such as a new entertainment centre or getaway, in a high-interest savings account.
2. Shop with cash and save up to $100
Track your expenses for a few months to understand how much you spend and what you spend on, recommends Tehranchian; then determine where you can comfortably cut back. If you spend $200 a month on clothes and you decide to only spend half that amount, you'll instantly save $100 a month.
With your new budget in place, Tehranchian suggests putting cash aside for each necessary expense. When you shop, only bring the allotted amount of money with you, leaving the plastic cards at home. Plastic makes it easy to buy on impulse and overspend.
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