I know I have really been harping this topic I just think it is soooo important! I think as a twenty-something we are guilty of that “I’m gonna live forever” “That will never happen to me” mindset. Clearly this is something I think twenty-somethings need to pay attention too now is the time to get yourself settled, don’t waste this gift that is our twenties! (and if you’re a thirty-something, forty-something etc. and still don’t have an EF….oh boy!)
So how do you make it a reality? You’ve looked into TFSAs, found one that works for you now what? How much money do you need to save and how on earth do you “magically come up with the money”? Experts say you should have between 3 and 6 months worth of expenses in your EF. That can be really overwhelming. So think about it in small steps. At first my goal was $1000 then $1500 now I’m almost at $2000. I really thought the more money that ended up in that account the more I would want to spend it but ironically watching that number grow every month is so addicting I find it really hard not to top up my contributions to try and hit that $5500/yr cap. Maybe one day, for now I’m a little too broke for that. Overall based on my personal expenses now I only NEED an EF of around $7000. If I continue contributing as I am I’ll hit that in three years. How?
I’m going to talk about setting up a budget that works for you next but I know budgeting is a nasty word to some people (why I have no idea, hopefully I can change your mind). I have currently budgeted $100 a month for emergency savings. Every second Tuesday (which used to be pay day) the bank automatically moves $50 from my chequeing account to my TFSA. Because it is the same day as my pay cheque I don’t even see the money. $50 missing from my cheque? I honestly don’t even notice it missing. I’m sure I could have up’d it to $75-100 even but $50 was a good starting comfort zone for me. When I go back to work full time after my maternity leave I will probably up it. I haven’t made any additional contributions and I get to watch that money grow every month. If you have your EF built into your budget you already know where the money is coming from.
2) KNOW YOUR VICE(S) & CUT THEM
We all have them. If I am going to go over budget in something its coffee. If husband is going to go over budget on something its video games. We accept these as our vices. These are the areas that slip easily. For me Tim Hortons is the devil. Seriously $2 for a coffee? That’s so cheap, clearly I won’t miss $2. Now I have really learnt to get this under control, it took time and dedication. that being said I still spent $283.62 at time hortons and another $204.64 at Starbucks in the last year from my debit card. I would say we could easily double that in cash which I didn’t keep track of properly. Before “getting it under control” I was spending closer to $700 a year at Tim Hortons alone, $2 at a time. How does this help a TFSA? Keep a post-it in your wallet every time you feel like stopping for a coffee (or buying a new pair of shoes, or a new air soft rifle) think about how much you really need it. If you can talk yourself out of the purchase, write down the price of the purchase on the post-it. At the end of the day or week transfer all the money you “almost” spent into you EF. I know A LOT of people who spend more money than that on smokes, fast food, restaurants, lotto, movies etc. Everyone has a vice. Own up to yours.
3) KNOW YOUR VICE(S) & PAY UP
If cutting your vices down doesn’t sound doable right now (let’s face it giving up smoking can be really difficult) keep track of what you are spending on your vice and double it. So if that coffee costs $2 I can have it but only if I match it by putting $2 in my EF. That coffee now essentially cost me $4…was it still worth it?? That’s still less than a Starbucks run so maybe. However if that air soft rifle was going to cost you $200…it would now cost $400…is that worth it? Do you have that money to spend? This tactic works great in two ways. It gets you saving an EF and gets you thinking about your spending. It is way to easy to swipe the card and never think twice.
4) USE CASH AND SAVE THE CHANGE
Husband and I did this for a couple years. We used cash for everything (and WROTE EVERYTHING down so we knew where the money was going) but we never spent the change. The change all went into a jar. In a year we had enough money in that jar to buy a brand new lazy boy recliner. My brother did the same thing over a longer period of time and was able to buy his first motorcycle….in change! How friggen cool is that? So Keep the change and put it in your EF. Even if you say you will spend toonies and loonies and save anything from a quarter down you will still be amazed at how quickly the money ads up.
5) BE CREATIVE
Find creative solutions that work for your own life. Do you have friends that always want to go out for Wing Wednesdays or Taco Tuesdays? Why not make some wings or tacos at home and have everyone over. Make it a potluck (I’ll bring the wings you bring the beer etc.) take the money you saved yourself and put it in your EF. Spending a lot of money on liquor? Ever consider making your own? Once you have all the start up supplies (which I admit are quite expensive) making your own beer and wine pays for itself quickly. (I HIGHLY suggest you look into before going and buying the supplies though ,they are expensive). Turn a hobby into a part time gig. Nothing crazy. Walk a dog, sell some jewelry, have a garage sale and sell some of the crap laying around your house, put an ad up on kijiji to clean houses but only clean 1 or 2 a week. Something small to give you that extra income to stash away. If you are a waitress stash your tips. There are so many solutions I am sure you can find one that works with you. An emergency fund of thousands of dollars starts with the first buck. (See what what I did there? huh huh…..instead of a journey of a thousand miles starts with the first step…..oh I know I’m not very clever. But I’m pretty decent with money so trust me). And remember, as soon as the account is opened and your first buck is in there you are making interest…aka free money! Start small!