Reduce Your Spending To Increase Your Savings

The most common thing I hear is that the best way to save more money is to earn more money. That's easier said than done at the moment. Many companies don't offer much in terms of annual salary increases. Even then, you are one of the lucky ones (since not many offer them at all!). Additionally, higher paying jobs are harder to find with the crawl that is the Canadian economy. There are so many qualified candidates applying for open positions, it's usually the person with the lowest salary expectations with sufficient qualifications that get hired.

What people don't seem to grasp is that another great way to increase your savings is to reduce your spending.

How does this work?

Assuming you found a way to earn an extra $100 a month, that $100 isn't actually $100. The government will want their cut too. Assuming a tax rate of 30%, that $100 translates to $70. In order to get $100 in your pocket, you'll actually need to earn an extra $142.86 a month.

However, if you managed to cut your spending by $100 a month, that $100 is actually $100 as it is money from your after tax income!

Which one sounds easier to do? Earning an extra $142.86 or reduce spending by $100?

Okay, that sounds great, but we're living paycheque to paycheque. We need all the money for our expenses! Where can we cut back to save $100 a month?

Let's assume the typical household has a television subscription with a well known national cable provider. Let's also assume they are subscribed with the something that isn't basic. Let's pretend they own their digital box and don't need to rent. This means they are spending $70.40 a month on a cable subscription ($62.30 + 13% tax).

Let's assume the typical household has one mobile phone subscription. Granted, mobile phones are so ubiquitous that even your 4 year old niece has one. However, for simplicity, let's just assume there is only one mobile phone is this household. Assuming we go to another company for their plan, there's a $65 a month plan that gives you 1000 minutes, 500 MB of data, unlimited evening and weekends calling, and unlimited texts. This plan seems like what the average person is receiving for their mobile phones. That's costing them $73.45 ($65.00 + 13% tax) a month. If we switch to prepaid, like I did here, used the phone for emergencies and used the internet features only on the home WiFi, we could save $64.03 a month ($73.45 - $9.42).

Added together, we have $134.43 in savings just by looking at television and mobile phones. Of course, some people bundle their services with one provider. The more services you have, the more you save. However, I don't think the savings are as significant as finding the best deal with other providers.

In any case, I just found $134.43 in savings!

There are many other places to find some savings. Are you biking to get your groceries? Are you getting your groceries when they are on sale? Are you doing your laundry during off-peak hours? Are you taking your coffee or tea to work in the morning?

Hopefully, the answer to all those questions is yes.

So reduce your spending and increase your savings. It doesn't get as simple as that.


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