Switchtoano-feecreditcard. Manygoldandplatinumcreditcards chargeasizableannualfeebilleddirectlytoyourstatement.Ifyoudon’t regularly use the perks associated with these expensive cards, then switch to a no-fee alternative and still benefit from reward programs.
Years ago I paid a $120 annual fee to use a Gold travel credit card.
Whiletheromanticnotionoftravellingtheworldonrewardpointswas
appealing,therealitywasIneverchargedenoughtogetofftheground.
Afterdoingthemath,IrealizedIneededtousethecardforfouryears andpay$480inannualfeesbeforecollectingenoughpointstotravelto theexoticlocationofToronto.AtthispointIknewthisGoldcardtravel programwouldneverflyforme.WhenIshoppedaroundandcompared
the benefits of no-fee cards, I found my wings with the President’s Choice Financial MasterCard. This deliciously feeless card offers free groceriesforlightweightspenderslikemyself.Byswitchingcreditcards, notonlydidIsavethe$120ayearonfeesbutovertheyearIcollected enoughpointstocoverhundredsinfreegroceries.Therearelotsofgreat optionsoutthere—gotothewebsitefortheFinancialConsumerAgency
ofCanada(fcac-acfc.gc.ca)tocomparecreditcardsandfindtheonethat worksbestforyou.
BOTTOMLINE:Byswitchingtoano-feecreditcardwithattainable
rewards,Iputfoodonthetableforfreeandsavedonannualfees.
Paymorethantheminimumbalance. Payingthebareminimumon
your monthly balance only prolongs the debt agony and increases the amountofinterestyoupaytothecreditcardcompany.Saveyourselfat
least18%ininterestchargesbypayingoffyourcreditcarddebtevery
month.Dependingonthesizeofyourdebt,youmayaddthousandsto
yourwalleteachyear.Forexample,onastartingbalanceof$1,500with anannualinterestrateof19%,yourdebtwouldbepaidoffin8years
and9monthsifyoupaidonlytheminimumbalanceof4%oftheinitial
balance, or $60 per month. The total interest paid is a staggering $889.77—onaninitialloanofonly$1,500.Ifyoucan’tpayyourcard
offinfulleachmonth,trytoatleastdoubletheminimumpaymentso
thatyou’reactuallytakingabiteoutoftheprincipal.
BOTTOM LINE: Pay off your credit cards sooner by putting down more than the minimum and save yourself hundreds—and even
thousands—indebtrepaymentinterest.
Negotiatealowerinterestrate. Ifyou’recarryingabalanceonyour credit card, don’t be afraid to call up your issuer and ask for a lower rate. Many lenders will cut you a break if you’ve been paying the minimumeachmonth,soaskiftheywillreduceyourmonthlyinterest
rate.
BOTTOM LINE: It costs you nothing to pick up the phone and negotiatealowerinterestratewithyourlenderandcouldhelpyou
payoffyourcreditcardsooner.Acutinratefrom19.5%to15%on
a$5,000balancewouldsaveyouaround$225ayear.
Schedule a card-free day, week or month. If you love paying in plasticandjustcan’tresistthestoredisplays,thentryschedulingcard-free days each month. You could save mega moolah by leaving your credit card at home in the freezer or hidden away in a shoebox. An alternativetoleavingyourcardathomeistoputastickynoteonthe
cardwitharemindernottospend.
BOTTOMLINE:Lookforwaystogetbywithoutacreditcardfora
fewdayseachmonthtocutbackonspendingandsaveyousome
extradollars.
HowIPaidOffMyStudentDebtinSixMonths
It’sbeennearly10yearssinceIretiredmystudentdebt.I’llneverforget the mixed feeling when I graduated from school with my bachelor’s degree:startinganewlife,yetatthesametimefacing$17,000ofdebt.
Lookingbackonthoseearlydaysmakesmystomachlurchandmyhead
ache.
ThechallengeofrepayingstudentloansiscommonacrossCanada.In
2004, Statistics Canada reported that the average student with a
bachelor’s degree graduated with a $19,500 debt. In comparison, my $17,000loandoesn’tseemasbad,butevenbackthenIknewdebtfelt
bad. I wanted to get the debt monkey off my back, so I made the commitmenttomyselfandtomyfinancialfuturetogetoutofstudent
debtfast.Someofmystrategieswerespecifictomyageandstageinlife, butmanyofthemcanbegreattacticsforanyonelookingtocrawloutof abigholeofdebt.ThisishowIpaidoffmy$17,000studentloaninjust sixmonths.
I negotiated my first job offer. The most important action I took in payingdownmystudentdebtwastonotjumpatmyfirstjoboffer.So
many new graduates get excited about that first offer and accept it quickly,fearingthatit’sthebesttheywillget.Nottrue,Isay.Whenyou getyourfirstoffer,congratulateyourselfforstarters,andthennegotiate foralittlebitmore.WhenIgotmyfirstoffer,Ithankedthecompany
wholeheartedly for their offer and stated my excitement about the positionandworkingwiththeirteam.IalsomentionedhowIfeltthejob wasagoodfitformyskillsandmydirection.Ikeptthehappyfeeling
goingbysayingIwasflexiblewithcompensation.However,wouldthe
companyconsiderpayingme$Xmore,asmyskillsweresolidinareas
A,BandC?Yes!Surprisingly,thisstrategyhasalwaysworkedforme.
Whilemyfellowgraduatesacceptedtheirfirstoffer,Inegotiatedabetter salary—andgavemyselfmoremoneyeverytwoweekstogetridofthat
debt.
Ikeptlivinglikeastudentanddidn’tbuystuff. WhenIgraduatedfrom school, I kept my same inexpensive apartment, my same bus pass and my same frugal habits. By continuing to live as I did when I had no money, I didn’t increase my cost of living and consume all my newly earned income. I’ve seen many new graduates land their first job and thengoandblowtheirpaychequeonstuff.Theymightbuyanewcaror
new stereo equipment or rent a bigger apartment. I’ve even seen new gradsbuyacondo.ButafterIgraduatedIboughtonlywhatIneededfor work,whichwasclothing.Essentially,Ilivedononlyone-thirdofmy
new salary as a technical writer, and devoted the other two-thirds to killingdebt.InsteadofkeepingupwiththeJoneses,Ikeptupwithmy
loaninterestandpaiddownlotsofloanprincipalsooner.Payingdown
principalquicklypreventedmyloanfromincreasinginsizewithinterest charges,savingmethousandsoverthelongerterm.
Imadeaplan. AftergraduationIhadtwostudentloanstopayback,and one had a much higher interest rate than the other. The task was daunting,butIsatdownandcalculatedmymonthlyafter-taxincome,
myrentandmyotherlivingexpensesandmadeamonthlyrepayment
scheduletoattackthehigher-interestdebtfirstwhilestillpayingmore thantheminimumbalanceonthesecondloan.Theplanworked.After
consistently hitting the principal, I paid off the steeper loan and then reallocated my repayments to the second loan. Making a plan and stickingtoitmadethehugetaskofpayingback$17,000manageableon
mysalarywithmylivingexpenses.
I used all available tax credits. In Canada students get tax credits for tuition fees, textbooks and an “education amount” above tuition and textbooks.EveryyearwhentaxseasonrolledaroundIwouldfilloutmy
taxreturnandusemanyoftheseavailablecreditstoreducethetaxesI paidonincome,thusdecreasingtheloanrequiredformyeducation.As
astu
dent,keepingtrackoftheseavailabletaxcreditsandnotlosingtax certificatesandformssavedmethousands.Isavedevenmorebytaking
my unclaimed educational credits and carrying them forward to use againstmyincomewhenIstartedworking.
I saved for retirement. When I started my first job, many in my graduatingclassthoughtIwassillyforsavingforretirementsosoon.My friendswouldsay,“I’monly23yearsold,whydoIneedtostartsaving now?”Theanswerissimple:moretaxbreaks.Whenyoubeginyournew
job and start pulling in a nice salary (because you negotiated better compensation),youpayincometax.Welcometobeinganadult.But,if
youstartcontributingtoaRegisteredRetirementSavingsPlan(RRSP),
yougettaxbreaks.Alongwithpayinglesstax,contributingtoanRRSP
has the added bonus of giving you the feeling of growing a nest egg.
Let’sfaceit,workinghardandhavingnothingtoshowforitbutdebt
repaymentisn’t exactlyfun. Sogrowing some savingscan really make youfeelgood.WhenIcontributedtomyRRSPwaybackthen,Itookmy
taxrefundandusedittopaydownmorestudentloandebt.Considerthis tax break the new math: you contribute to retirement, you get tax
breaks, you get tax refunds, you feed the refund to your debt. This is howyouwinthe“getoutofstudentdebtfast”game.
Readthefineprint:Creditcardsmayseemlikeashoppinggiftfrom heaven, but remember they’re financial instruments designed to make banksmoney.Soreadthefineprintbeforeyousignupforanything,and playbytherules.Somecardsmayofferenticingintroductoryrateson
balancetransfersbutwillescalatethoseratesinstantlyifyoumisseven onepayment.Othercardswillapplythelowerrateonlytoyourbalance
transferandthenchargeyouahigherrateonpurchases—butwillapply
yourpaymentsonlytothebalancetransferuntilit’spaidoff,soyou’re rackingupinterestonanythingyouaddtothecard.
BOTTOMLINE:Understandingwhat’sonofferwithyourcreditcard
helpsyoutomaximizeyoursavingsandminimizeanynastyshocks
whenyourbillarrives.Ifyouadd$1,000inpurchasestoabalance
of$5,000onacreditcardthatgivesyouonly6.3%onthebalance
transfer,youcouldpileuparound$700worthofdebtininterest
charges in the three years that $1,000 compounds at 18% before youpayitoff.
Banking
I’vebeenknowntofireafewbigbanksinmylifetimebecauseoftheir
highservicefeesonchequingaccountsandlowinterestratesforsavings.
I’malwayspolitewhenIhandabankerapinkslip,butI’mmorethan
happy to move my money to banks that give customers competitive rates.
Don’tstickaroundinarelationshipjustbecauseit’sapaintomove
yourmoneytoanewbank.Takeagoodhardlookathowmanyservice
feedingsyou’vepaidandconsiderswitchingbankstogetthebestbank
foryourbuck.Herearesometipsforfindingthebestdealinbanking.
Banishbankingfees. Idareyoutoaddupallyourbankingfees.Go ahead,openyourstatementsandcalculateyourmonthlyaccountfees,
minimum balance fees, withdrawal fees, cheque-cashing fees, moving-money fees, paying-bills fees and ATM fees, fees and more fees.
Depending on your banking habits, all these tiny transaction fees and chargescanadduptohundredsayearjustforaccessingyourmoney.If
you’re done with getting dinged, then consider visiting the Financial ConsumerAgencyofCanadaonline(fcac-acfc.gc.ca)tocomparewhich
banksofferthebestdealsforyourspecificbankingneeds.Aftervisiting thissitemyselfseveralyearsago,Imadethedecisiontofiremycurrent fee-happy bank and open accounts with online banks ING Direct and President’s Choice Financial. By making the switch, I stopped paying bankingfeesaltogetherandhavesavedhundredsovertheyears.
BOTTOM LINE: Banking fees can be a lucrative business for big Canadian banks and can eat away at your savings over time.
Considerswitchingtoano-feechequingaccounttominimizeyour
banking fees and to access your money without being charged.
Even if you only save the account charge of $15 per month, that stilladdsupto$180ayearsavedfortheexactsameservice.
Negotiate lower banking fees. Walking into your bank and asking forabetterdealonfeesisfree.Ifyou’reagoodcustomerandasknicely, manybanksareopentowaivingfeesandservicechargestokeepyou
banking.Manytimesabankingrepresentativewillreviewyourbanking
habitsandfindabetterplanwithinthatfinancialinstitution,savingyou bigdollarseachmonth.
BOTTOM LINE: Comparing the different accounts within your
financialinstitutionandnegotiatingforlowerbankingfeescanbe
timewellspentandsaveyoudozensofdollarseachyear.
ChangeyourATMhabits. Planningyourcashwithdrawalsaheadof
timecansaveyoulotsofmoneyinATMchargesoverthespanofayear.
Axe your ATM fees by using only your bank’s machines, withdrawing cashonlyafewtimesamonthandknowinghowmanyfreeATMvisits
permonthyou’reallowedforyourparticularaccount.Ifyouraccount’s
ATMfeesdon’tjivewithyourbankingneeds,considerswitchingplans
withinyourfinancialinstitutiontogetabetterdeal.
BOTTOMLINE:Savingfour$1.50ATMchargeseachmonthaddsup
to$72ayearinsavings.
Openahigh-interestsavingsaccount. Ifyou’rekeepingafewbucks sitting around in your chequing account, then move your savings to a high-interestaccount,likethoseofferedthroughonlinebanksINGDirect or President’s Choice Financial or credit unions Achieva Financial or Outlook Financial. (Many of the big banks also offer high-interest accounts,butwatchoutforrestrictionsandfees.)
BOTTOM LINE: Open a high-interest savings account and make
about 3% more on your savings each year, rather than almost nothing offered through standard bank accounts. On a $1,000
depositthisaddsaround$30toyoursavingsinthefirstyearand
moreinsubsequentyearswithcompoundinterest.
InvestingandInsurance
Whenitcomestosavinglotsofloonies,ithelpstothinkintermsofboth long-and short-term needs. Investment vehicles like retirement savings plans and tax-free savings accounts fit the bill to store your cash and keepyousafeforretirement,andemergencyfunds,willsandinsurance
allguaranteethatyourfrugalhabitswillserveyouandyourfamilyin
timesofneed.Herearesomesimplesuggestionsforsavingonyourlong-
termfinancialchoices.
Payoffyourdebt. Thesinglebestfinancialinvestmentyoucanmake istopayoffyourdebt.Whetheryouhaveacarloan,mortgage,student
loans,lineofcreditorcreditcardbalance,reducingyourdebtsavesyou thousandsandjustmakesyoufeelgood.Everydollaryouputdownon
debt gives you an immediate tax-free return on the interest you otherwisewouldhavepaid.
BOTTOMLINE:Beforeinvestinginthelateststockmarketdarling,
pay down your debt and reduce the interest paid to creditors to savethousands.Forexample,putting$5,000againstadebtat12%
savesyouaround$634ofinterestinoneyear.That’saprettygood
rateofreturnfora$5,000investment.
Loweryourinvestmentfees. Ilearnedaboutinvestmentfeesthree years
afteropeningmyfirstRegisteredRetirementSavingsPlan(RRSP).
Iwasexcitedtobesavingformyretirementearlyonandlookedforward totheincometaxbreaksforcontributingafairchunkofmysalary.Back then I happily handed my money over to a financial adviser who invested my retirement contributions in mutual funds. But after
watching my portfolio consistently (and significantly) lag the financial indexes,Itookacloserlookatmyinvestments.Iquicklydiscoveredthe impact that fees called management expense ratios (MERs) and loads couldhaveonmyretirementsavings.Doingthemath,myMERof3.25%
ona$25,000portfoliowascostingmearound$813ayearandtotalled
$2,438 over three years, not including the loss of compound interest.
Beingayoungerinvestorwithzerodesiretopayhundredsofthousands
of dollars in fees by the time I turned 65, I decided to find a less expensive way to invest for my future. The answer came by accident when my neighbour’s copy of MoneySense magazine landed in my mailbox.Thecoverstorytoutedlow-costindexfundsandaninvestment
strategy with the silly name of “The Couch Potato Portfolio.” After researching index funds and learning how they passively track market indexeswithultra-lowfees,Ifilledouttheformsandmovedmyentire
RRSPtoadiscountbrokeragewhereIembarkeduponbecomingado-it-
yourself-investor. Years later I still invest in a diversified portfolio of index funds and shudder to think how much I might otherwise have spentininvestmentfees.Tolearnmoreabouthowtoinvestinlow-cost
index funds, visit moneysense.ca and check out the Couch Potato Portfolio.
BOTTOM LINE: By moving my RRSP from high-fee mutual funds
with a 3.25% MER to a balanced portfolio of index funds with a 0.40% MER, I saved myself $713 on investment costs in the first yearalone,sincetheCouchPotatoPortfoliofeestotalledonly$100
397 Ways to Save Money: Spend Smarter & Live Well on Less - PDFDrive.com Page 3