DOLLARS AND SENSE
If your plans for 2020 include buying a house, focus now on keeping your spending in check and building up your savings for a down payment, closing costs and moving expenses. Michele Lerner asked Katie Bossler, a financial counsellor, to share simple tips for reducing spending and increasing savings. Here are Bossler’s suggestions:
1. Don’t transfer money from your savings account to your chequing account unless it’s an emergency. If you find yourself doing this often, consider having a chequing and savings account at two different financial institutions. It takes longer for the transfer to go through, and the extra barrier can help you avoid unnecessary purchases.
2. Read the fine print when signing up for a new subscription or service. Otherwise, you may find that you enrolled in a service with an automatic payment plan. Review your credit card statements each month to make sure you didn’t unknowingly sign up for a service. Don’t forget to include monthly and annual subscriptions when planning your budget.
3. Auto-deduct savings from your paycheque each month. If your employer offers direct deposit, have your deposit split into two different accounts: a savings account and a chequing account. If you are paid biweekly, depositing $150 from each paycheque will net you almost $4,000 a year.
4. Leave online purchases in the cart for 24 hours before purchasing. You will either forget about them or have more clarity on whether you need them. The average U.S. consumer spends about $450 per month on impulse buys. That is about $5,400 per year that could be saved.
5. Create a separate and specific savings account for your down payment funds. Separating it from any other emergency fund or your general savings/chequing account gives you a clear vision on where you’re headed, how much you’ve saved and reminds you of your goal. Separating it also helps stave off the temptation to dip into those funds for other purposes and will help you stay on track.
6. Budget and automate. Make an effort to budget the amount you can afford to put toward your savings, then see how you might increase it. Perhaps forgo your specialty coffee two days a week? That’s an extra $25 a month right there. And automate your savings plan. Create an automatic deposit to move funds into your down payment savings account. Not having to take the time and move that money is helpful. It also ensures the funds don’t linger where you might be tempted to spend them rather than push forward toward your goal of home ownership.