Seven secrets for saving money

1. Spend less than you earn. Sounds simple, doesn’t it? Yet, we pile on debt more than twice as fast as we grow income. According to the Bank of Canada, Canadian consumers collectively now owe $752.1 billion, up 36 per cent over the past 10 years when adjusted for inflation. Over the same period personal disposable income, or take-home pay, has risen just 15 per cent. 2. Know the difference between good and bad debt. A low-interest mortgage on a well-maintained house in a good, safe neighbourhood? Good debt. Charging a flat-out, no-hold-barred vacation in Hawaii to a credit card with a 20 per-cent interest rate? Bad debt. Bad, bad debt! 3. Have emergency savings that are really, truly, for emergencies. You never know when you or your partner might lose a job to layoffs, illness or circumstance. Shailendra says that in this economy, six months-worth of living expenses in a secure account is a must. 4. Get into the savings habit. People who learn to save when they’re young are better off financially as adults, says Shailendra. Be a good example and a good parent by teaching and encouraging your children to save. 5. Take advantage of government-sanctioned tax savings plans. Registered Retirement Savings Plans (RRSPs) let you defer income and the taxes on it to a later time when your income and income-tax rate is likely to be lower. In 2009, Tax Free Savings Accounts (TFSAs) let Canadians deposit up to $5,000 in a savings plan or investment vehicle and keep any investment income or capital gains associated with that money tax-free, even when it’s withdrawn. 6. Resist impulse purchases and make credit cards work for you. Credit cards provide us with free use of money for a short period – usually two to four weeks. That money can be used to earn interest, or at least make our purchases interest-free. But make it a cardinal rule to pay off your credit cards each month. Set up your bills to auto-pay a few days before the due date and use no-fee credit cards, unless there are enough benefits to justify the extra cost. 7. Harness your latte factor. Whether it’s shoes, video games or a five-dollar-a-day coffee habit, we can all economize a little. Borrow books and magazines from the library instead of buying them. Bring your lunch to work, entertain friends at home and take the kids on a nature walk instead of to a movie. You may find that a brighter financial future is just the beginning.

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