5 Practical Ways To Start Saving Money

Saving money on household expenses increases your wealth potential.

Saving money can be challenging, but particularly for anyone new to it. There are many different avenues you can take to maximize your saving potential, with all of them adding extra cushion to your wallet. Whichever way you choose, money should always be set aside for a rainy day, emergency fund, and some sort of investment.

We’re regularly told to save 3-6 months of our monthly bills as security against the loss of income. This is excellent advice, but I think taking it up a notch can make all the difference. My strategy is to work vigorously toward setting aside 12 months of bills as a bare minimum. Assuredly this is difficult for most households but achievable with the proper guidance.

Until you can decide what your overall savings goals are and how you plan to reach such goals, your money should be secured away in a savings account. This is for two primary reasons:

  • Your money will be safe and out of reach from unnecessary spending.
  • Your money can earn interest in a savings account. However, I don’t recommend relying on a savings account for long-term interest gain. It should simply be a temporary setup until you move on to something more economically practical.

There are many options for people to begin saving money, and it all comes down to individual preferences and goals.

1. Start Saving with Automatic Payments

If I had to go back in time to when I started saving every penny, I would have chosen to automate designated savings.

This is one of the many strategies I use today, and the psychology behind doing this definitely makes sense. You become accustomed to your new direct deposit amount. The automated funds are out of sight and therefore out of mind. You will naturally adjust to having access to fewer funds, which will set you on track to spend less. In some way, this manifests a scarcity mindset, thus impeding your temptation to spend irresponsibly.

  • Reach out to your payroll department and inform them that you would like to split your direct deposit into however many portions. Say, for example, you want to set aside $200/biweekly into a separate savings account. You need to provide them with the payroll deposit form associated with the new account and specify the amount. They should have the ball rolling by the next payroll deposit date.
  • It is wise to set restrictions on your savings account to reduce the temptation and ease of access. For example, many savings accounts can be set up to require dual signatures for a cash withdrawal. Ask a family member you trust to authorize this account with you. You can also choose a savings account that will automatically charge you a relatively hefty fee every time a withdrawal is complete.

These are just a few options to ensure you are making the most out of automatic payments. This is my personal favorite when it comes to basic savings strategies and hacks.

2. Cut Down On Your Grocery Bill

In light of the unstable economy and grocery prices set to increase on average $700 annually in 2021, it’s a great time to start monitoring your grocery bill.

Below is a list of hacks I incorporated into my savings journey once I realized how much I wasted on our household grocery bill. It was not a pretty number!

Buying No-Name Saves You Money

When buying generic, the only valuable impact you will notice is going to be in your bank account. Grocery stores will almost always carry a generic brand in nearly every food option so this hack is fail-proof.

Below is a comparison of generic vs. brand names to analyze if there really is a savings benefit.

Ingredients:
Chicken Thighs, Broccoli & Rice
Cost of No-Name ItemCost of Brand-Name Item
Chicken Thighs (660 grams)$6.60
$1.00/100 grams
$13.20
$2.00/100 grams
Broccoli Florets (1700 grams)$6.80
$0.40/100 grams
$14.28
$0.84/100 grams
Boxed Minute Rice (700 grams) $3.00
$0.43/ 100 grams
$5.29
$0.76/100 grams
Total = $16.40Total = $32.77
Budget designed by author

You can see above that with a basic chicken dish, you can save almost half the cost if you shop with savings intent. Of course, prices differ depending on geographic location and grocery stores. However, this gives you a benchmark on the degree of saving you can incorporate with a bit of change in your shopping style.

Purchase Clearance and Sale Items

A little trick to finding the best deals on perishables is going to the grocery store as soon as they open. They will lay out the previous day’s unsold items with massive discount stickers slapped onto them. You can save anywhere between 30%-50% on your total bill if you only purchase sale items.

Another way to shop for sales is to download the Flipp App. This unique app is designed to give you access to flyers from participating companies in your geographic location. It offers insight into all current and future sales. This is another one of my favorites because it helps with satisfying my budget needs. I can seek out the item(s) I need or cheaper alternatives before leaving my house.

Save Money With A Lean Monthly Grocery Budget

You might be shocked to grasp, but you are likely far overspending on your groceries. Therefore, you can use this as an opportunistic area to squeeze out more money for your savings goal. Create a grocery list that includes only the necessities! Start becoming comfortable with fewer store-bought snacks. For families with children, snacks are imperative, so it could be helpful to start making your own snacks at home and storing them in bulk.

Suppose you start off by reviewing your previous grocery bills. In that case, it’s usually a good start in pinpointing all of the unnecessary purchases that your household could do without. And don’t forget to incorporate the cost of liquor. This might be difficult to cut out of the budget. Still, if it costs you a hefty amount, you might want to consider cutting it down significantly.

Pay With Cash

To add to my previous point, grocery shopping with just enough cash allocated in your budget is another useful hack to ensuring you don’t overspend. Leave your cards at home and disable your smartphone pay app.

Consider your credit limit and now compare that with your spending budget. In most cases, you have far more credit available than your grocery bill should cost. Because of this immediate access to credit and flexible payment plans, card users inevitably overspend on virtually everything. “Keep your cards at home” is the best motto for anyone trying to get on the financial track.

3. Stop Eating Out

Oftentimes, I hear financial gurus promoting the notion that “Starbucks coffee and avocado toast” will not break your bank or prevent you from reaching financial freedom. I suppose this notion is based on the idea that you would need to purchase profuse amounts of lattes and fancy breakfast toast for it to add up to anything of significance. I get their point, but the bigger picture is being overlooked.

You see, if you live by the theory that small purchases such as take-out and coffee are too small to actually affect your wealth, you got it all wrong. These repeated small purchases are part of a bigger problem, namely, poor money management behaviors. Bad habits are powerful enough to ultimately become your destiny. So, although spending here and there on convenience items may seem trivial, have a look at your overall annual spending and reconsider what it means.

The average Canadian household of 2.9 occupants spends $2,775.00 annually on food purchased from restaurants. An additional $316.00 annually is spent on restaurant beverages and snacks totaling $3,091.00.

Now, let’s compare these numbers to the average Canadian spending ability. According to Equifax Canada, the average non-mortgage debt as of 2020 was $23,035.00

Suppose we designed a basic budget based solely on eating out and considering the above numbers. In that case, the average household can pay off their non-mortgage debt in 7.45 years.  This is assuming they don’t acquire an extra grocery cost to compensate. This can be done simply by cutting out one leisure habit and trivial purchases such as “Starbucks coffee and avocado toast.

Again, these small habits seem minuscule, but they mean a lot more when you look at the bigger picture. They can have a significant impact on your wealth potential.

4. Buying in Bulk Saves Money In The Long Run

Start saving money by buying more! How does this make any sense?

  • You spend less time in stores when you have ingredients on hand. Grocery stores spend millions of dollars annually to amp up their marketing tactics to ensure you spend more money.
  • Buying in bulk means buying extras only when they have a clearance price. This helps reduce the overall cost of the item because you bought them at a discounted price.

This can be particularly beneficial when shopping for non-perishables because you can buy them on clearance and store them for future use. Always take notice of best before dates, even though most non-perishables are safe for long-term storage. If you are like me and don’t have a Costco membership, that’s not a problem. As mentioned above, seek out sales at your local grocery store and try shopping at the less expensive stores.

5. Become Friendly With Free-Stuff

Household items and everyday essentials can unnoticeably cost us more than we are prepared to pay. Creating a household item monthly budget is a significant first step in reducing this cost. A few options for free or heavily discounted items are;

  • Facebook Marketplace
  • Charities
  • Kijiji

When free items are being given away, they can be excellent economical alternatives to newly purchased items. They get the same job done. Free things don’t always equate to garbage. In many cases, the seller no longer needs it and chooses to give it away so it can be reused.

If you’re struggling to start saving because it’s challenging to stay on a budget, you might find this step-by-step guide helpful. Although budgeting and saving money go hand-in-hand, you need to be on track with a concrete budget to effectively save money.

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